What To Expect From Deere’s Q3?

DE: Deere logo

Deere & Company (NYSE: DE) is scheduled to report its fiscal third-quarter results on Friday, August 19. We expect Deere to post revenues and earnings above the street estimates. The company should benefit from higher demand for agriculture equipment and a robust pricing environment. Not only do we expect Deere to report an upbeat Q3, we find that DE stock has more room for growth, as discussed below. Our interactive dashboard analysis of Deere’s Earnings Preview has additional details.

(1) Revenues are expected to be higher than the consensus estimate

  • Trefis estimates Deere’s Q3 fiscal 2022 total revenues to be around $13.0 billion, slightly higher than the $12.9 billion consensus estimate.
  • The company saw a strong rebound in demand for agriculture equipment over the last few quarters, a trend that likely continued over the latest quarter.
  • Furthermore, rising farm income, more than the average age of agricultural equipment, and rising commodity prices likely contributed to the company’s top-line growth.
  • Looking at the last quarter, Deere’s revenue rose 11% y-o-y to $13.4 billion, driven by a 10% rise in agricultural and turf-related equipment sales, while construction and forestry equipment sales were up 9%.
  • Our dashboard on Deere Revenues provides more details.
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(2) EPS likely to be above the consensus estimates

  • Deere’s Q3 fiscal 2022 earnings per share (EPS) is expected to be $6.70 per Trefis analysis, above the consensus estimate of $6.65.
  • Deere’s net income of $2.1 billion in Q2 reflected a 17% rise from its $1.8 billion profit in the prior-year quarter. The company’s operating margins remained around 20% for the quarter.
  • Looking at the full fiscal 2022, we expect EPS to be $23.45, compared to the $18.99 seen in fiscal 2021.

(3) DE stock has more room for growth

  • We estimate Deere’s Valuation to be $410 per share, reflecting a 19% upside from its current market price of $344.
  • This represents a forward P/EBITDA multiple of 10x based on our Deere’s EBITDA forecast and compares with the last two-year average of 9x.
  • That said, if the company reports upbeat Q3 results and full fiscal guidance better than the street estimates, it is likely that the P/EBITDA multiple will be revised upward, resulting in even higher levels for DE stock.

While DE stock has room for growth, it is helpful to see how Deere’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Corning vs. Amerco.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Aug 2022
MTD [1]
YTD [1]
Total [2]
 DE Return 0% 0% 234%
 S&P 500 Return -1% -14% 83%
 Trefis Multi-Strategy Portfolio 1% -13% 245%

[1] Month-to-date and year-to-date as of 8/10/2022
[2] Cumulative total returns since the end of 2016

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