Back to top

Image: Bigstock

Time to Buy Deere (DE) Stock with Earnings Approaching?

Read MoreHide Full Article

Industrial products giant Deere & Company (DE - Free Report) ) is set to round out this week’s earnings lineup with its fiscal first quarter report on Friday, February 17.

As one of the larger components of the S&P 500 and the world’s largest producer of agricultural equipment Deere’s Q1 earnings are much anticipated.

Let’s take a look at what’s going on with Deere stock before its quarterly report.

Overview & Sentiment

Deere’s Manufacturing – Farm Equipment Industry is currently in the top 14% of over 250 Zacks Industries indicating that the company should be able to benefit from a strong business environment at the moment.

This is very intriguing with Deere being the industry leader, mostly attributed to its farm machinery having advanced features and superior construction to its competitors.

Zacks Investment Research
Image Source: Zacks Investment Research

Most known for its famous tractors, Deere is a leader and innovator in harvesting equipment, planting equipment, seeding equipment, and precision AG technology that allows farmers to monitor, manage, and maximize farm operations.

Furthermore, Deere and construction and mining equipment manufacturer Caterpillar (CAT - Free Report) ) typically set the barometer of excellence in the broader industrial products sector.

Q1 Preview & Outlook

Deere’s Q1 earnings are projected at $5.53 per share, which would be an 89% increase from Q1 2022 EPS of $2.92 a share. Sales for the quarter are expected to be $11.31 billion, up 32% from the prior year quarter. 

Zacks Investment Research
Image Source: Zacks Investment Research

Deere’s earnings are now forecasted to jump 20% to $28.08 a share in fiscal 2023 compared to EPS of $23.28 in 2022. Earnings are expected to rise another 4% in FY24. Even better, earnings estimate revisions have continued to trend higher for both FY23 and FY24.

On the top line, sales are forecasted to be up 12% in FY23 and rise another 2% in FY24 to $54.72 billion. More impressive, Fiscal 2024 would represent 39% growth from pre-pandemic levels with 2019 sales at $39.25 billion.

Zacks Investment Research
Image Source: Zacks Investment Research

Deere Earnings ESP

The Zacks Surprise Prediction indicates Deere could significantly beat quarterly expectations on its bottom line with the Zacks Consensus for Q1 EPS at $5.53 and the Most Accurate Consensus at $5.68 a share.

Zacks Investment Research
Image Source: Zacks Investment Research

Performance & Valuation

In the last year, Deere stock is up +7% to outperform the S&P 500 and the Machinery Farm Markets -7% performances but this has trailed fellow industrial products giant Caterpillar’s +17%. However, over the last decade, Deere’s +473% total return including dividends has topped Caterpillar, the benchmark, and its Zacks Subindustry’s +354%.

Zacks Investment Research
Image Source: Zacks Investment Research

Deere stock currently trades around $408 per share and 14.6X forward earnings. This is slightly above the industry average of 13.8X but Deere & Co is a proven leader in its space. Plus, DE stock trades 54% below its decade high of 31.8X and at a 12% discount to the median of 16.6X.Zacks Investment Research

Image Source: Zacks Investment Research

Dividends

Thriving business can lead to dividend increases and this has been the case for Deere stock with the company raising its yield by 6% (7 cents per share) in December. Deere now has a 1.17% dividend yield which is above the industry average of 1.12%.

Zacks Investment Research
Image Source: Zacks Investment Research

Bottom Line

Deere stock currently sports a Zacks Rank #2 (Buy) heading into its fiscal first-quarter earnings report. The top and bottom line growth continues to be impressive in addition to DE trading attractively relative to its past from a valuation standpoint.

Lastly, it does appear that Deere may offer strong guidance as earnings estimate revisions have continued to trend higher, and if the company can also top quarterly expectations DE stock could see some nice rallies to the upside.  


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Caterpillar Inc. (CAT) - free report >>

Deere & Company (DE) - free report >>

Published in