Is Deere’s Stock Overvalued?

by Trefis Team
-1.50%
Downside
171
Market
168
Trefis
DE
Deere
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Taking into account current market conditions and the company’s future growth prospects, Deere (NYSE:DE) looks overvalued. Deere is one of the leading industrial and transportation equipment companies. It manufactures agricultural, construction, and forestry machinery, diesel engines, drive-trains used in heavy equipment, and lawn care equipment, and also provides financial services and other related activities. Trefis captures the key factors that are driving our price estimate for Deere’s stock in an interactive dashboard, parts of which we highlight below. We estimate Deere’s Valuation to be $168 a share, which is roughly 5% below its current market price. You can alter the key assumptions to arrive at your own estimate for the company’s stock price using our dashboard.

An Overview of Deere’s Revenues

  • Deere’s Revenues have increased from $37.4 billion in 2018 to $39.3 billion in 2019 and is expected to decline to $36.3 billion in 2020 (Note: Deere reports on a fiscal year ending November)
  • Deere expects a decline in sales for 2020 in both its Agriculture segment (by 5-10%) and Construction / Forestry (10-15%) on the back of declining US exports due to trade war pressures continuing in 2020.

To understand how each of Deere’s operating segments has performed over the years and what is the outlook, view our dashboard analysis.

Estimating Net Income

  • Net Income increased from $2.4 billion in 2018 to $3.3 Billion in 2019. We expect net income to be around $3 billion in 2020, led by a depressed revenue level.

Estimating Earnings Per Share

  • EPS increased from $7.3 per share in 2018 to $10.1 per share in 2019, driven by a rise in net income and decreased share count.
  • We estimate EPS to be $9.6 in 2020.
  • EPS decline from 2019 can be attributed to lower Net Income.

Share Price Estimation

  • A trailing P/E multiple of 17.6x looks appropriate for Deere’s stock based on our detailed analysis of the company.
  • Using this figure with our forecast of $9.57 for Deere’s EPS gives a price estimate of $168 for Deere’s stock.

Additional details about how Deere’s P/E multiple compares with peers Caterpillar and 3M can be found in our interactive dashboard.

 

 

See all Trefis Price Estimates and Download Trefis Data here

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