Shares of Farm Equipment Maker Deere Rise on Earnings Beat, Guidance Hike
Deere & Company shares rose over 1% in pre-market trading on Friday after the world’s largest maker of farm equipment reported better-than-expected earnings in the fiscal first quarter and lifted its annual profit forecast.
The agricultural, construction and forestry equipment manufacturer said its net sales from equipment operations rose nearly 6% to $8.5 billion, surpassing the Wall Street consensus estimate of $8.2 billion. The company’s net income declined to $903 million, or $2.92 per share. That too beat the market expectations of $2.38.
The world’s largest farm equipment maker forecast fiscal 2022 net income in the range of $6.7 billion and $7.1 billion, higher than the previous estimate of $6.5 billion to $7.0 billion.
“Deere (DE) FY 1Q22 EPS of $2.92 vs. Cons of $2.35 and Jef at $2.20. F1Q was a beat across the board, with slightly higher sales and margin and a lower tax rate all contributing. DE raised its F22 outlook for Net Income and now calls for Net Income of ~$6.9bn at Mid-Point (Prior: $6.75bn at Mid-Point), although consensus was already at $6.9bn. Guidance implies a ~25% incremental EBIT margin,” noted Stephen Volkmann, equity analyst at Jefferies.
Deere stock rose over 1% to $385.50 in pre-market trading on Friday. The stock rose nearly 11% so far this year after surging over 27% in 2021.
“Despite a significant number of headwinds in 1Q, Deere (DE) posted a clean top & bottom line beat & raised FY22 guidance by 2.5%. DE’s newly initiated Leap Ambitions – incl a 20% Equip Ops OROS target (vs. 15% mid-cycle op margin target prior) – should refocus investors on the LT secular thesis,” noted Courtney Yakavonis, Equity Analyst at Morgan Stanley.
“Deere (DE) is one of the highest quality, most defensive names within the broader Machinery universe, given an historically lower cyclicality of Ag Equipment and history of strong management execution. FY22 should see a continued acceleration in the NA large ag replacement cycle, as commodity tailwinds are complemented by moderating trade headwinds and improving farmer sentiment. With mgmt continuing to execute against its 15% mid-cycle operating margin target, we see continued momentum in DE’s margin improvement narrative – representing one of the most attractive idiosyncratic margin improvement narratives in the broader Machinery group.”
Deere Stock Price Forecast
Fifteen analysts who offered stock ratings for Deere in the last three months forecast the average price in 12 months of $435.50 with a high forecast of $487.00 and a low forecast of $320.00.
The average price target represents a 14.45% change from the last price of $380.53. Of those 15 analysts, 11 rated “Buy”, three rated “Hold”, while one rated “Sell”, according to Tipranks.
Morgan Stanley gave the base target price of $485 with a high of $664 under a bull scenario and $261 under the worst-case scenario. The investment bank gave an “Overweight” rating on the farm equipment maker’s stock.
Several analysts have also updated their stock outlook. D.A. Davidson raised the target price to $455. Deutsche Bank lifted the price objective to $400 from $398. Oppenheimer upped the price target to $425 from $395. Barclays increased the target price to $415 from $400.
Technical analysis suggests it is good to hold as 100-day Moving Average and 100-200-day MACD Oscillator shows a mixed signal.
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