Should You Buy Deere Stock After A 6% Fall Last Week?

DE: Deere logo

Deere & Company (NYSE: DE) stock saw a 6% fall over the last week despite reporting upbeat Q1FY22 results. Deere’s revenue (from equipment sales) of $8.5 billion was up 6% y-o-y, and it compares with our forecast of $8.3 billion. The revenue growth was driven by a 7% rise in agricultural and turf-related equipment sales, while construction and forestry equipment sales were up 3%. Looking at the bottom line, the company’s earnings of $2.92 per share, although were down from the $3.87 figure in the prior-year quarter, they were well above our forecast of $2.20 and the consensus estimate of $2.23.

Despite an earnings beat, DE stock has fallen from $394 levels at the beginning of last week to $369 on Fri, Feb 18. This can be attributed to the company’s upward revision of its net income guidance to $6.90 billion vs. $6.75 billion earlier (at mid-point of the provided range), falling short of analysts’ expectations. However, we believe that DE stock is undervalued currently, and investors can use the current dip as a buying opportunity for better gains in the long run. That said, there are near-term headwinds for the broader markets, including the Russia-Ukraine conflict and its impact on the oil market. Any adverse reaction by the broader markets will also impact Deere stock.

We currently estimate Deere Valuation to be $452 per share, reflecting more than 22% upside potential from its current levels of $369. This represents a P/E multiple under 19.7x based on its expected EPS of $22.90 in 2022. The 19.7x P/E multiple compares with an average of 16.5x for the last three years. We believe that Deere deserves a higher multiple than its historical average, given a sharp rise in earnings. For perspective, Deere’s expected EPS of $22.90 in 2022 will reflect a significant 130% rise from the $9.93 figure seen in 2018. Furthermore, the company’s 2023 EPS forecast is much higher at $26.00.

Relevant Articles
  1. What’s Next For Deere Stock After An Upbeat Q1?
  2. Will Deere Stock Trend Higher Post Q1?
  3. What’s The Outlook Like For The Capital Spending Theme In 2023?
  4. Pick Either Deere Stock Or Its Peer – Both May Offer Similar Returns
  5. What’s Next For Deere Stock After A Solid Q4?
  6. What To Expect From Deere’s Q4?

Our Recent Analyses on Deere:

While DE stock looks undervalued, our analysis on Deere vs. Thermo Fisher Scientific finds TMO, with a similar revenue base, to be an even better bet. Check out how Deere’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

 Returns Feb 2022
MTD [1]
YTD [1]
Total [2]
 DE Return -2% 8% 258%
 S&P 500 Return -4% -9% 94%
 Trefis MS Portfolio Return -2% -11% 251%

[1] Month-to-date and year-to-date as of 2/22/2022
[2] Cumulative total returns since the end of 2016

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