Deere Shares Gain on Q1 Earnings Beat, Guidance Hike

Deere & Company shares jumped about 2% in pre-market trading on Friday after the world’s largest maker of farm equipment reported better-than-expected earnings in the fiscal second quarter and lifted its full-year guidance.

Agricultural, construction and forestry equipment manufacturer reported net income of $1.790 billion for the second quarter ended May 2, 2021, or $5.68 per share, compared with net income of $666 million, or $2.11 per share, for the quarter ended May 3, 2020. That was also higher than the market expectations of $4.49 per share.

The Moline, Illinois-based company said its worldwide net sales and revenues increased 30% to $12.058 billion for the second quarter of 2021 and rose 25% to $21.170 billion for six months.

Deere forecasts net income for fiscal 2021 is forecast to be in a range of $5.3 billion to $5.7 billion. Full-year earnings forecast raised to a range of $5.3 to $5.7 billion.

Following this, Deere shares rose about 2% to $361.0 in pre-market trading on Friday. The stock rose over 30% so far this year.

Analyst Comments

Deere’s (DE) F2Q continued to see a steady increase into today’s report. Still, today’s results and FY21 guidance were significantly ahead of expectations, and we believe the company’s operating leverage, the updated FY21 forecast and strong pricing should support the shares,” noted Stephen Volkmann, equity analyst at Jefferies.

“The real standout for us is pricing, where DE is the only company we follow driving significant price in the current tight market conditions.”

Deere Stock Price Forecast

Fourteen analysts who offered stock ratings for Deere in the last three months forecast the average price in 12 months of $408.64 with a high forecast of $455.00 and a low forecast of $365.00.

The average price target represents a 15.04% increase from the last price of $355.22. Of those 14 analysts, 12 rated “Buy”, two rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $410 with a high of $625 under a bull scenario and $181 under the worst-case scenario. The firm gave an “Overweight” rating on the farm equipment maker’s stock.

Deere & Company (DE) is one of the highest quality, most defensive names within the broader Machinery universe, given an historically lower cyclicality of Ag Equipment and history of strong management execution. FY21 should mark a tangible acceleration in the NA large ag replacement cycle, as commodity tailwinds are complemented by moderating trade headwinds and improving farmer sentiment,” noted Courtney Yakavonis, equity analyst at Morgan Stanley.

“With mgmt continuing to execute against its 15% mid-cycle operating margin target, we see continued momentum in DE’s margin improvement narrative – representing one of the most attractive idiosyncratic margin improvement narratives in the broader Machinery group.”

Several other analysts have also updated their stock outlook. Deere & Company had its price objective boosted by Robert W. Baird to $425 from $375. Robert W. Baird currently has an outperform rating on the industrial products company’s stock.

Stifel Nicolaus raised their price target to $365 from $325 and gave the stock a buy rating. Deutsche Bank raised their price target to $402 from $360 and gave the stock a hold rating.

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