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Reasons to Hold Deere (DE) Stock In Your Portfolio
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Deere & Company (DE - Free Report) impressed investors by delivering growth in both its top and the bottom line for the last three consecutive quarters despite inflationary pressures and supply-chain snarls. This has been aided by improving demand in its end markets and price realization that helped offset the steep production and other expenses. DE will continue to benefit from improving commodity prices, which will encourage farmers to spend more on farm equipment. Strong replacement demand will also continue to boost its top line. Demand for construction equipment will be supported by the anticipated growth in infrastructure investments.
Deere currently has a Zacks Rank #3 (Hold) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B combined with a Zacks Rank #1 (Strong Buy), or Rank #2 (Buy), or #3 offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
Let’s delve deeper and analyze the factors that make this stock worth holding in.
Solid Q4 Results: Deere recently reported fourth-quarter fiscal 2022 earnings of $7.44 per share, which marked a solid 81% improvement from the prior-year fiscal quarter’s levels. This followed a 20% increase in earnings per share in the second quarter of fiscal 2022 and 16% in the third quarter. DE has been witnessing strong demand for both farm and construction equipment. Higher shipment volumes and price realization has helped offset the impact of higher costs.
Upbeat FY23 Guidance: Deere expects net income for fiscal 2023 between $8 billion and $8.5 billion compared with $7.1 billion in fiscal 2022.
Positive Earnings Surprise History: DE has an average trailing four-quarter earnings surprise of 7.1%.
Healthy Growth Projections: The Zacks Consensus Estimate for Deere’s fiscal 2023 earnings is currently pegged at $27.28, suggesting year-over-year growth of 17.2%. The consensus mark for fiscal 2024 earnings stands at $28.90, indicating an expected improvement of 6% over fiscal 2023. DE has an estimated long-term earnings growth rate of around 12%.
Strong Demand to Fuel Top Line
The USDA (U.S Department of Agriculture) projects net farm income at $160.5 billion for 2022, indicating a 13.8% year-over-year increase. If realized, net farm income will reach the highest level since 1973. Crop receipts are expected to be up 19% in 2022 from the prior-year levels, backed by solid gains in soybeans, corn and wheat. Corn and soybean prices are expected to remain strong next year as well. The upbeat outlook for corn and soybeans, which are the most important grains for cash crop farming, bodes well for farmer sentiment and will likely translate into improved order levels for Deere. The need to replace aging equipment will also support demand for Deere’s agricultural equipment. Demand for its construction equipment will be supported by increased infrastructure spending.
Efforts to Improve Margins
Deere is assessing cost structure by reviewing organization efficiency and footprint assessment, which in turn will help improve margins. Its price realization action is expected to offset higher material and freight costs. Deere’s smart industrial strategy is aiding customers manage escalating input costs while improving their yields.
Growth Strategies in Place
Deere remains well poised for growth over the long term, backed by steady investments in new products and geographies. The company will benefit from the concerted focus on launching products with advanced technology and features, which provides it with a competitive edge. The company is seeing strong demand from its new product launches like ExactRate planter applied fertilizer systems and AutoPath.
Deere acquired Bear Flag Robotics, which develops autonomous driving technology compatible with existing machines. The acquisition underscores Deere’s smart industrial strategy to deliver smarter machines with advanced technology. The combination of Deere, Blue River and Bear Flag positions automated farming as a key opportunity for creating value for the company and its customers.
Price Performance
Image Source: Zacks Investment Research
Shares of Deere have gained 23.8% in the past year compared with the industry’s 21.8% growth.
Stocks to Consider
Some better-ranked stocks from the Industrial Products sector are Applied Industrial Technologies (AIT - Free Report) , Tenaris (TS - Free Report) and W.W. Grainger (GWW - Free Report) . AIT sports a Zacks Rank #1, while TS and GWW hold Zacks Rank #2 at present.
Applied Industrial Technologies’ earnings surprise in the last four quarters was 24.7%, on average. In the past 60 days, its earnings estimates have increased 4.6% for 2022. For the ongoing year, the bottom line is estimated to be $7.52, suggesting growth of 14.3% from the previous year’s level. AIT stock has appreciated 26% in the past year.
Tenaris has an estimated year-over-year earnings growth rate of 131.5% for the current fiscal year. The earnings per estimate are currently pegged at $4.33. The estimates have been revised by 5.1% north in the past 60 days. TS has an average trailing four-quarter earnings surprise of 20.9%. Its shares have surged 57% over the past year.
W.W. Grainger delivered a trailing four-quarter earnings surprise of 10.1%, on average. GWW’s current-year earnings are estimated to be $29.31 per share at present, suggesting an estimated growth of 161.1% from the year-ago reported figure. The estimates have moved up 4.4% in the last 60 days. GWW’s shares have risen 16% in the past year.
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Reasons to Hold Deere (DE) Stock In Your Portfolio
Deere & Company (DE - Free Report) impressed investors by delivering growth in both its top and the bottom line for the last three consecutive quarters despite inflationary pressures and supply-chain snarls. This has been aided by improving demand in its end markets and price realization that helped offset the steep production and other expenses. DE will continue to benefit from improving commodity prices, which will encourage farmers to spend more on farm equipment. Strong replacement demand will also continue to boost its top line. Demand for construction equipment will be supported by the anticipated growth in infrastructure investments.
Deere currently has a Zacks Rank #3 (Hold) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B combined with a Zacks Rank #1 (Strong Buy), or Rank #2 (Buy), or #3 offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
Let’s delve deeper and analyze the factors that make this stock worth holding in.
Solid Q4 Results: Deere recently reported fourth-quarter fiscal 2022 earnings of $7.44 per share, which marked a solid 81% improvement from the prior-year fiscal quarter’s levels. This followed a 20% increase in earnings per share in the second quarter of fiscal 2022 and 16% in the third quarter. DE has been witnessing strong demand for both farm and construction equipment. Higher shipment volumes and price realization has helped offset the impact of higher costs.
Upbeat FY23 Guidance: Deere expects net income for fiscal 2023 between $8 billion and $8.5 billion compared with $7.1 billion in fiscal 2022.
Positive Earnings Surprise History: DE has an average trailing four-quarter earnings surprise of 7.1%.
Healthy Growth Projections: The Zacks Consensus Estimate for Deere’s fiscal 2023 earnings is currently pegged at $27.28, suggesting year-over-year growth of 17.2%. The consensus mark for fiscal 2024 earnings stands at $28.90, indicating an expected improvement of 6% over fiscal 2023. DE has an estimated long-term earnings growth rate of around 12%.
Strong Demand to Fuel Top Line
The USDA (U.S Department of Agriculture) projects net farm income at $160.5 billion for 2022, indicating a 13.8% year-over-year increase. If realized, net farm income will reach the highest level since 1973. Crop receipts are expected to be up 19% in 2022 from the prior-year levels, backed by solid gains in soybeans, corn and wheat. Corn and soybean prices are expected to remain strong next year as well.
The upbeat outlook for corn and soybeans, which are the most important grains for cash crop farming, bodes well for farmer sentiment and will likely translate into improved order levels for Deere. The need to replace aging equipment will also support demand for Deere’s agricultural equipment. Demand for its construction equipment will be supported by increased infrastructure spending.
Efforts to Improve Margins
Deere is assessing cost structure by reviewing organization efficiency and footprint assessment, which in turn will help improve margins. Its price realization action is expected to offset higher material and freight costs. Deere’s smart industrial strategy is aiding customers manage escalating input costs while improving their yields.
Growth Strategies in Place
Deere remains well poised for growth over the long term, backed by steady investments in new products and geographies. The company will benefit from the concerted focus on launching products with advanced technology and features, which provides it with a competitive edge. The company is seeing strong demand from its new product launches like ExactRate planter applied fertilizer systems and AutoPath.
Deere acquired Bear Flag Robotics, which develops autonomous driving technology compatible with existing machines. The acquisition underscores Deere’s smart industrial strategy to deliver smarter machines with advanced technology. The combination of Deere, Blue River and Bear Flag positions automated farming as a key opportunity for creating value for the company and its customers.
Price Performance
Image Source: Zacks Investment Research
Shares of Deere have gained 23.8% in the past year compared with the industry’s 21.8% growth.
Stocks to Consider
Some better-ranked stocks from the Industrial Products sector are Applied Industrial Technologies (AIT - Free Report) , Tenaris (TS - Free Report) and W.W. Grainger (GWW - Free Report) . AIT sports a Zacks Rank #1, while TS and GWW hold Zacks Rank #2 at present.
Applied Industrial Technologies’ earnings surprise in the last four quarters was 24.7%, on average. In the past 60 days, its earnings estimates have increased 4.6% for 2022. For the ongoing year, the bottom line is estimated to be $7.52, suggesting growth of 14.3% from the previous year’s level. AIT stock has appreciated 26% in the past year.
Tenaris has an estimated year-over-year earnings growth rate of 131.5% for the current fiscal year. The earnings per estimate are currently pegged at $4.33. The estimates have been revised by 5.1% north in the past 60 days. TS has an average trailing four-quarter earnings surprise of 20.9%. Its shares have surged 57% over the past year.
W.W. Grainger delivered a trailing four-quarter earnings surprise of 10.1%, on average. GWW’s current-year earnings are estimated to be $29.31 per share at present, suggesting an estimated growth of 161.1% from the year-ago reported figure. The estimates have moved up 4.4% in the last 60 days. GWW’s shares have risen 16% in the past year.