Deere Shares Drops 3% Despite Q1 Beat

Deere (NYSE: DE) reported stronger-than-expected fiscal Q1 results. Despite supply chain challenges and higher costs, DE topped both earnings and revenue estimates driven by solid execution and robust performance across all segments.  

However, shares of the farm equipment company dropped 3% on February 18 to close at $369.10.

Q4 Numbers

Adjusted earnings of $2.92 per share significantly beat analysts’ expectations of $2.26 per share, but it fell short of the adjusted earnings of $3.87 per share reported for the prior-year period.

Net sales jumped 5% year-over-year to $9.56 billion and also exceeded consensus estimates of $8.19 billion. The increase in revenues reflected a surge in Production and Precision Ag sales, which increased 9% to $3.35 billion, while Equipment Operations sales grew 6% to $8.5 billion.

Fiscal 2022 Outlook & New Goals

Based on robust Q1 results, management raised the financial guidance for fiscal 2022. Deere now forecasts net income for fiscal 2022 to be in the range of $6.7 billion to $7.1 billion.

Furthermore, concurrent with the earnings announcement, the company unveiled Leap Ambitions, the company’s new goals linked to the Smart Industrial strategy and operating model introduced earlier in 2020.

Deere targets to achieve the mentioned goals over the rest of the decade aimed at enhancing economic value and sustainability for Deere’s customers, employees, and investors.

CEO Comments

Deere CEO, John C. May, commented, “Looking ahead, we expect demand for farm and construction equipment to continue benefiting from strong fundamentals.”

Regarding the new goals, he further added, “Because of the hard work that has been done executing the Smart Industrial operating model, we are leveraging technology that delivers improved customer profitability, productivity, and sustainability.”

Wall Street’s Take

Following the Q1 results, Goldman Sachs analyst Jerry Revich maintained a Buy rating on Deere.

Revich has a positive outlook on the stock, “Given accelerating precision ag adoption and ag machinery share of farmer capex that is approaching normalized levels this year following an extended capital stock reduction cycle.”

The rest of the Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 11 Buys, 3 Holds and 1 Buy. The average Deere stock price projection of $432.08 implies 17.06% upside potential from current levels.

TipRanks’ Smart Score

DE scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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