What To Expect From Deere’s Q4?

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Deere & Company (NYSE: DE) is scheduled to report its fiscal fourth-quarter results on Wednesday, November 23. We expect Deere to post revenues and earnings above the street estimates. The company should benefit from higher demand for agriculture equipment, a robust pricing environment, and a rise in production rate. Although we expect Deere to report an upbeat Q4, we find that DE stock is fully valued, 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 Q4 fiscal 2022 total revenues to be around $13.6 billion, slightly higher than the $13.4 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, higher than average age agricultural equipment, and rising commodity prices likely contributed to the company’s top-line growth.
  • Looking at the last quarter, Deere’s revenue rose 22% y-o-y to $14.1 billion, driven by a solid 43% rise in production & precision agriculture equipment sales, while construction and forestry equipment sales were up 8%.
  • Our dashboard on Deere Revenues provides more details.
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(2) EPS likely to be marginally above the consensus estimates

  • Deere’s Q4 fiscal 2022 earnings per share (EPS) is expected to be $7.13 per Trefis analysis, marginally above the consensus estimate of $7.11.
  • Deere’s net income of $1.9 billion in Q3 reflected a 13% rise from its $1.7 billion profit in the prior-year quarter. The company’s operating margins declined 70 bps to around 18.8% for the quarter.
  • Rising input costs have impacted the company’s operating margins in the recent past.
  • Looking at the full fiscal 2022, we expect EPS to be $23.02, compared to the $18.99 seen in fiscal 2021.

(3) DE stock is fully valued

  • We estimate Deere’s Valuation to be $396 per share, which is 3% below its current market price of $407.
  • At its current levels, DE stock is trading around 18x its expected forward earnings, compared to the last three-year average of 16x, implying that DE stock is fully valued now.
  • That said, if the company reports upbeat Q4 results and provides full fiscal 2023 guidance better than the street estimates, the P/E multiple will likely be revised upward, resulting in higher levels for DE stock.

While DE stock is fully valued, 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 at 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 Nov 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 DE Return 3% 19% 295%
 S&P 500 Return 3% -16% 78%
 Trefis Multi-Strategy Portfolio 8% -16% 231%

[1] Month-to-date and year-to-date as of 11/16/2022
[2] Cumulative total returns since the end of 2016

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