monastery (DE) gave guidance for fiscal 2023 early on Friday after it easily beat earnings estimates for the second quarter. DE stock jumped to capture a key level, then fell in a choppy trade.
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Tractor maker Deere is seen as a pioneer of the farm economy. It also manufactures heavy machinery for the construction and forestry markets.
“Expectations were clearly high so far today and Derry handily beat the consensus despite some headwinds,” William Blair analysts said in a note to clients on Friday.
Analysts Baird, Lawrence Di Maria and Ross Sparenblick, rate stocks when outperforming. They added that Deere’s earnings call on Friday morning should provide more insight into the outlook and orders, “given the recent negative move in commodity prices.”
dir profits
estimatesFor the quarter ended April 30, Deere’s earnings were expected to grow 26% to $8.58 per share, according to FactSet consensus estimates. Total revenue increased nearly 20% compared to the previous year to $15.993 billion.
results: Deere’s earnings jumped 42% to $9.65 a share, though that’s a slowdown from 124% in the first quarter. Revenue swelled 30% to $17.39 billion, above expectations, but still in its second consecutive quarter of slowing sales growth.
Produce and precision farming sales jumped 53%. Small farmland and turf sales grew 16%. Construction and forest sales increased by 23%.
“Deere continues to benefit from favorable market conditions and an improved operating environment,” CEO John May said in Deere’s earnings release.
“Although supply chain constraints remain a challenge, we are seeing further improvement,” May added.
prospects: Deere now expects full-year net income of $9.25-9.50 billion, against its previous target of $8.75 billion-$9.25 billion. FactSet shows that analysts expected net income of $9.06 billion.
DE stock
Shares of Deere are up 3.9% in the stock market today, surpassing the 50-day moving average for the first time since early April. But Deere stock fluctuated between gains and losses in mid-trading, falling below the 50-day line.
DE stock peaked last November and has been trending lower, with the 10-week moving average now below the 40-week line, as MarketSmith’s chart shows.
Larva (CAT) f United Rentals (URI) is also trending below and below key levels. CAT and URI stock are up 1.6% each Friday.
Farm prices, machinery sales
The World Bank projects that agricultural commodity prices will fall 7% this year and are likely to fall again in 2024, the Texas Farm Bureau said May 18, citing the bank’s latest commodity market forecast.
Prices of all types of agricultural equipment have skyrocketed in recent years for reasons very similar to those that have pushed automobile prices to record highs. As demand and supply chain issues begin to balance, lower agricultural commodity prices could further pressure demand for farm equipment.
In April, construction giant Caterpillar gave a dim outlook for equipment sales as well. United Rentals, which rents scissor lifts and a range of heavy equipment, delivered a mixed report at the same time.
Risks to Deer stock
Matt Arnold, an analyst at Edward Jones, said earlier in May that downside risks for Deery include “lower agricultural commodity prices, which could come under pressure either due to stronger-than-expected crop yields or trade disputes with US export partners.”
Furthermore, Arnold added that “slowing economic growth could hurt construction and forest markets in Deere.”
However, the analyst rates the DE stock a Buy, based on valuation and long-term growth factors.
Year-to-date, farm inventory is now down about 14%. Deere stock pays a dividend yield of 1.3%.
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