Deere & Company (DE) designs, manufactures, and distributes agricultural and construction equipment worldwide.
I am bullish on the stock. (See Insiders’ Hot Stocks on TipRanks)
Recent Developments
Deere is in a re-growth period due to the emergence of artificial intelligence, and precision farming.
The firm’s placing emphasis on facilitating the needs for automated farming and construction. The company holds a significant cash position that could support the necessary research and development, as well as advertising, to ensure it leads the market.
Furthermore, Deere’s set to take advantage of the equipment upgrade cycle. There’s been more than a 60% decrease in used equipment inventories over the past seven years, and rising equipment values signal a need for equipment upgrades. Deere could benefit as a consequence.
Earnings, Guidance
Deere beat Q3 earnings estimates as sales grew by 29% year-over-year. The three primary segments driving sales in Q3 were Precision Agriculture (up 29%), Small Agriculture & Turf (up 32%), and Construction & Forestry (up 38%).
The company also upgraded its guidance for the full year, anticipating full-year earnings to come in between $5.7 billion and $5.9 billion, versus previous estimates of $5.3 billion.
Key Metrics
Diluted EPS have grown by 100.9% over the past year and are expected to grow an additional 33% per year for the next three to five years. If we combine the statistic with the stock’s P/E (19.6), which is currently 12.4% below its five-year average, and its PEG of 0.2, we could conclude that this is a significantly undervalued stock.
Many may be worried about the company’s 307.3% leverage, but its interest-coverage ratio of 2.9 suggests the debt burden isn’t a problem at all.
Wall Street’s Take
Wall Street thinks the stock is a Moderate Buy, with three Buys, one Hold, and one Sell assigned in the past three months.
The average Deere price target of $407.20 implies 18.4% upside potential.
Disclosure: At the time of publication, Steve Gray Booyens did not have a position in any of the securities mentioned in this article.
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