Deere (NYSE:DE) posted stellar fourth-quarter results that beat analysts’ EPS expectations while also providing a bullish outlook for FY22.

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The manufacturer that reported better-than-expected earnings results not only quarreled widespread supply chain issues, semiconductor shortages, and rising costs but also faced difficulties when 14% of its workforce went on strike for five weeks in mid-October.

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WHAT HAPPENED

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The labor strike that began on 14 October 2021 had approximately 10,000 union-represented workers walking off the job for the first time in over three decades.

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The demand for higher wages and better benefits came when Deere’s equipment sales boomed, and other manufacturers have boosted pay to recruit workers. After confirming a new contract, union members returned to their jobs last week.

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According to Deere, the deal will cost as much as $300 000 million a year during the 6-year contract, with some expenses for pensions and other benefits deferred to later years.

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WHAT TO EXPECT

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Some immediate costs for the new contracts and reduced production during the 35-day strike will reflect in the first-quarter results of Deere’s 2022 fiscal year.

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However, the company expects the effects to lessen as the year progresses. Costs for materials and transportation for 2022 will increase by $2 billion, with two-thirds of the expenses occurring in the first half of the year.

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However, CEO John May expects that high crop prices, along with increased investments in infrastructure, should continue to be driven by strong sales for farm and construction equipment.  

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The company predicts sales of large farm equipment to increase by as much as 25% in 2022. Moreover, Deere plans to raise prices on large farm equipment by 9% and construction and forestry machinery by 8% next year.

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THE RESULTS

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On Wednesday, 24 November, shares of the largest agricultural equipment manufacturer soared 5.2%, closing at $367.86.

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Net sales and revenues rose 16% year-over-year to $11.327 billion, and Net profit for 2022 is estimated to be between $6.5 billion and $7 billion.

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Overall revenue for the most recent quarter was $11.33 billion, up 16% from $9.73 billion in the same quarter a year ago.

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