Will Deere Stock Trend Higher Post Q1?

DE: Deere logo

Deere & Company (NYSE: DE) is scheduled to report its fiscal first-quarter results on Friday, February 17. We expect Deere stock to trade sideways, with its Q1 revenues likely falling marginally above but earnings slightly below the street estimates. The company should benefit from higher demand for agriculture equipment and a robust pricing environment. Although we expect Deere to report a mixed Q1, 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 marginally higher than the consensus estimate

  • Trefis estimates Deere’s Q1 fiscal 2023 total revenues to be around $11.4 billion, slightly higher than the $11.3 billion consensus estimate, and this compares with $9.6 billion in the prior-year quarter.
  • 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 agricultural equipment age and a strong demand outlook likely contributed to the company’s top-line growth.
  • Looking at the last quarter, Deere’s revenue (equipment) rose 40% y-o-y to $14.4 billion, driven by a solid 59% for Production & Precision Agriculture, 26% for Small Agriculture & Turf, and 20% for Construction & Forestry.
  • Our dashboard on Deere Revenues provides more details on the company’s segments.
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(2) EPS likely to be marginally below the consensus estimates

  • Deere’s Q1 fiscal 2023 earnings per share (EPS) is expected to be $5.48 per Trefis analysis, marginally lower than the consensus estimate of $5.53.
  • Deere’s net income of $2.2 billion in Q4 reflected a 75% rise from its $1.3 billion profit in the prior-year quarter. The company’s operating margins rose over 400 bps to around 19% for the quarter.
  • Looking at the full fiscal 2023, we expect EPS to be $27.27, compared to the $23.33 seen in fiscal 2022.

(3) DE stock is fully valued

  • We estimate Deere’s Valuation to be $413 per share, which aligns with the current market price of $407.
  • At its current levels, DE stock is trading around 15x its expected forward earnings, compared to the last three-year average of 16x, implying that DE stock has little room for growth.
  • That said, if the company reports upbeat Q1 results and provides 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 Feb 2023
MTD [1]
YTD [1]
Total [2]
 DE Return -3% -4% 297%
 S&P 500 Return 2% 8% 86%
 Trefis Multi-Strategy Portfolio 3% 14% 260%

[1] Month-to-date and year-to-date as of 2/8/2023
[2] Cumulative total returns since the end of 2016

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