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Deere Posts Stellar Q4 Results; Shares Up 5%

Deere & Company (DE) posted stellar fourth-quarter results with both earnings and revenue exceeding estimates by huge margins.

Despite the almost two week long labor strike during the quarter, and the ongoing supply chain issues coupled with inflationary trends, the company managed to finish the year with a positive outlook.

Following the news, shares of the world’s largest agricultural equipment manufacturer soared 5.2%, closing at $367.86 on November 24.

Stellar Results

The company reported earnings of $4.12 per share, up 72.4% against the prior-year quarter and significantly higher than analysts’ estimates of $3.90 per share.

Furthermore, net sales and revenues rose 16% year-over-year to $11.327 billion, outpacing analysts’ estimates of $10.44 billion.

For the full year fiscal 2021, Deere’s net sales and revenues climbed 24% to $44.02 billion, while earnings jumped 118.5% to $18.99 per share.   

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Management Comments

Chairman and CEO of Deere, John C. May, said, “Our results reflect strong end-market demand and our ability to continue serving customers while managing supply-chain issues and conducting contract negotiations with our largest union.”

May added, “Looking ahead, we expect demand for farm and construction equipment to continue benefiting from positive fundamentals, including favorable crop prices, economic growth, and increased investment in infrastructure… At the same time, we anticipate supply-chain pressures will continue to pose challenges in our industries. We are working closely with our suppliers to address these issues and ensure that our customers can deliver essential food and infrastructure more profitably and sustainably.”

Analysts’ View

Responding to Deere’s performance, analyst Jefferies Stephen Volkmann reiterated a Buy rating on the stock with a price target of $450, which implies 22.3% upside potential to current levels.

Volkmann said, “Given broad-based industrial supplier constraints and the UAW strike for the last two weeks of the quarter, we believe there was more uncertainty than normal around DE’s F4Q. Still, today’s results showed reasonably good operating leverage of 22%, showing solid margin progression in our view despite a difficult in terms of strike, logistics and labor issues.”

Overall, the stock has a Moderate Buy consensus rating based on 4 Buys and 3 Holds. The average Deere price target of $414.86 implies 12.78% upside potential to current levels. Shares have gained 43.4% over the past year.

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