Deere smashed earnings expectations and raised fiscal-year financial guidance. Shares were rising Friday.
Deere (ticker: DE) reported fiscal second-quarter earnings per share of $9.65 from about $16 billion in equipment sales.
Wall Street was looking for earnings per share of $8.58 on equipment sales of $14.9 billion, according to FactSet. A year ago, Deere reported earnings of $6.81 a share on sales of $12 billion.
For all of fiscal 2023, Deere expects net income of between $9.25 billion and $9.5 billion. In February, management said it expects fiscal 2023 net income of $8.75 billion to $9.25 billion
Deer shares were up 3.4% in premarket trading Friday. S&P 500 futures rose 0.1%.
Dow Jones Industrial Average
futures were flat.
This is breaking news. Read a preview of Deere’s earnings below and check back for more analysis soon.
Wall Street sees sunny skies ahead for Deere. Investors aren’t so sure. Both groups will get a weather report from the heavy-equipment maker when it reports quarterly earnings on Friday morning.
It’s the second fiscal quarter for Deere (ticker: DE). The company’s year ends in October, after the U.S. harvest is in.
Wall Street expects second-quarter earnings per share of $8.58 on equipment sales of $14.9 billion, according to FactSet. A year ago, Deere reported earnings per share of $6.81 on sales of $12 billion.
As important as earnings will be guidance. In February, management said it expects fiscal 2023 net income of $8.75 billion to $9.25 billion, up from a range from $8 billion to $8.5 billion Deere had provided in November.
Strong earnings and an improving 2023 outlook haven’t been enough for investors, though. Coming into Thursday trading, Deere stock has slipped about 14% year to date, and down about 15% over the past three months. The S&P 500 is up about 7% year to date, and has gained 2% over the past three months.
It’s possible that investors think things can’t get better for Deere. Full-year earnings per share are expected to come in around $31, a record.
Some on Wall Street are more upbeat than investors seem to be. “We expect Deere to maintain a positive stance around the prospects for 2024 large ag-equipment volumes in most markets,” wrote Citi analyst Timothy Thein in a report previewing earnings. He rates Deere stock at Buy with a $505 price target.
That values Deere stock at about 16 times earnings, a big jump to its current price/earnings ratio of about 12 times estimated fiscal 2023 earnings.
Bernstein analyst Chad Dillard, like Thein, thinks the focus should be on 2024, but isn’t as bullish, writing this week the outlook paints “an increasingly cautious picture.” Corn prices are sitting at about $5.60 a bushel, down from more than $7.50 a bushel a year ago, when corn was near a record. Corn, and other food commodity prices, determine farm income, which determines what farmers can spend on Deere tractors and combines.
Dillard’s has a Hold rating on Deere stock with a $367 price target, right around where the stock has traded recently.
Corn prices above $5.50 are still good, historically speaking. Prices have averaged about $4.70 for the past 10 years. And overall, more analysts feel like Thein than Dillard, as 70% of them have Buy ratings on the stock. That’s high. The average Buy-rating ratio for stocks in the S&P 500 is about 53%. The average analyst price target on Deere stock is about $476 a share.
Write to Al Root at email@example.com