What’s Next For Deere Stock After An Upbeat Q1?

+1.90%
Upside
375
Market
382
Trefis
DE: Deere logo
DE
Deere

Deere stock (NYSE: DE) is up 4% in a month, outperforming the broader S&P500 index, down 1%. The rise in DE stock can be attributed to the upbeat Q1 fiscal 2023 results it reported last week. Deere’s revenue of $11.4 billion (equipment operations) reflected a stellar 34% y-o-y rise. Sales were up 55% for Production & Precision Agriculture, 14% for Small Agriculture & Turf, and 26% for Construction & Forestry. The sales growth was driven by higher volume/mix and better price realization. Its earnings of $6.55 on a per share basis were up a significant 114% y-o-y, led by about 900 bps rise in operating margin.

Deere is benefiting from a strong farming equipment demand. Farmers are seeing higher incomes due to tightening supplies of corn and wheat. Farmers have more incentive to increase planting given the high grain prices. [1] Given the strong demand outlook and pricing growth, the company raised its outlook for 2023. It expects sales to trend higher and net income between $8.75 and $9.25 billion, compared to its prior guidance of $8.0 and $8.5 billion, and the $7.1 billion figure, the company reported in 2022.  Strong Q1 performance and outlook boded well with the investors, evident from the stock price appreciation.

We now estimate Deere’s Valuation to be around $482 per share, about 13% above the current market price of $426. This represents a 16x P/E multiple based on its expected EPS of $30.05 in fiscal 2023, aligning with its last four-year average. At its current valuation of $426, DE appears to have more room for growth, as it is trading at a comparatively low multiple of 14x forward earnings compared to its historical average mentioned above.

Relevant Articles
  1. Is Deere Stock Fully Valued At $400?
  2. Should You Pick Deere Stock At $360 After 6% Fall In A Week Amid Downbeat Outlook?
  3. Down 4% This Week What’s Next For Deere Stock After Downbeat 2024 Guidance?
  4. Should You Pick Deere Stock At $380 Ahead of Its Q4 Results?
  5. Are Capital Equipment Stocks Like Deere Worth Buying Despite Rising Interest Rates?
  6. Should You Buy Deere Stock After A 10% Fall In A Week Despite Solid Q3?

While DE stock looks like it can see higher levels, 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.

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates

Notes:
  1. High Food Prices, Chinese Demand Boost Prospects of U.S. Agriculture Companies, Patrick Thomas, The Wall Street Journal, Feb 11, 2023 []