The equipment manufacturer and distributor, Deere & Company (DE), is scheduled to release its fiscal fourth quarter financial results on November 22. Wall Street expects the company to report earnings of $7.46 per share for the quarter, indicating a 3.8% year-over-year decline. Its revenue for the quarter is expected to come in at $13.66 billion, down 4.8% from the prior year’s period.  

Before examining DE’s fundamentals, let’s take a look at the recent developments that could influence the company’s future performance.

On October 2, DE unveiled the innovative one-piece hardened beaver saw tooth tailored for DE Wheeled and Tracked Feller Bunchers. The new design enhances tooth durability through a beveled feature at each tip, optimizing performance against materials beyond wood. This could bolster the company’s growth prospects by securing a competitive edge in diverse forestry applications.

On September 22, DE and DeLaval partnered to establish the Milk Sustainability Center (MSC), a digital ecosystem to enhance the efficiency and sustainability of dairy farming. The platform, open to partners, aspires to furnish farmers with comprehensive data, fostering a holistic understanding of their operations.

By spearheading a digital ecosystem that addresses the intricate challenges of dairy farming, DE positions itself at the forefront of technological innovation in agriculture. As the MSC becomes a hub for industry stakeholders, partners, and dairy farmers seeking sustainable solutions, it could create revenue streams through partnerships, data analytics services, and technology adoption.

Moreover, on September 12, DE introduced the groundbreaking QuikTrak™ mowers for 2024, setting a new standard for commercial-grade stand-on mowers catering to professional landscape contractors. Increased speed, power, and fuel capacity could attract customers seeking productivity and also contribute to the company’s revenue growth.

Shares of DE have gained 5.5% over the past six months to close the last trading session at $380.33.

Here are the financial aspects of DE that could influence its performance in the near term:

Solid Recent Financials

For the third quarter that ended July 30, 2023, DE’s net sales and revenues increased 12% year-over-year to $15.80 billion. In addition, net income and net income per share attributable to DE grew 58.1% and 65.6% from the prior year’s period to $2.98 billion and $10.20, respectively.

Furthermore, as of July 30, 2023, the company’s cash and cash equivalents stood at $6.58 billion, compared to $4.36 billion as of July 31, 2022. Its total assets amounted to $103.40 billion, compared to $86.82 billion as of July 31, 2022.

Sound Historical Growth

Over the past three years, DE’s revenue and EBITDA increased at a CAGR of 19.8% and 33.8%, respectively. Its net income and EPS grew at respective CAGRs of 54.7% and 57.9%. In addition, the company’s total assets rose at a 10.2% CAGR during the same period.

Mixed Analyst Estimates

The consensus revenue estimate of $55.81 billion for the year ended October 2023 reflects a 16.5% year-over-year improvement. Likewise, the consensus EPS estimate of $33.86 for the same period exhibits a 41.2% rise from the previous year.

However, analysts expect DE’s revenue and EPS for the fiscal year ending October 2024 to decline 1.1% and 2.9% from the prior year to $55.18 billion and $32.86, respectively.

Mixed Valuation

In terms of forward non-GAAP P/E, DE is trading at 11.35x, 34.3% lower than the industry average of 17.27x. Its forward EV/Sales of 3.02x is 75.2% lower than the 1.73x industry average. However, DE’s forward Price/Sales of 1.98x is 49.3% higher than the 1.33x industry average.

Mixed Profitability

DE’s trailing-12-month asset turnover ratio of 0.65x is 19.4% lower than the industry average of 0.80x. However, the stock’s trailing-12-month EBITDA margin of 23.61% is 71.8% higher than the 13.74% industry average. Furthermore, its trailing-12-month net income margin of 16.37% is 170.6% higher than the industry average of 6.05%.

POWR Ratings

DE’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, which equates to Neutral in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. DE has a C grade for Value, consistent with its mixed valuation. The stock also has a C grade for Stability, justified by its 24-month beta of 0.99.

DE is ranked #52 in the 79-stock Industrial – Machinery industry. Click here to access DE’s Growth, Momentum, Quality, and Sentiment ratings.

Bottom Line

By addressing diverse industry challenges, fostering partnerships, and enhancing product offerings, DE is laying the foundation for sustained growth and prominence in the market. DE’s recent innovations, from the one-piece saw tooth for forestry to the Milk Sustainability Center and QuikTrak™ mowers, strategically position the company for significant long-term growth.

However, considering the company’s mixed analyst estimates and profitability, it might be wise to await a more opportune entry point in DE ahead of its upcoming earnings release.

How Does Deere & Company (DE) Stack Up Against Its Peers?

While DE has an overall grade of C, equating to a Neutral rating, you may also check out these other A-rated stocks within the Industrial – Machinery industry: Tennant Company (TNC), Twin Disc, Incorporated (TWIN), and Taylor Devices, Inc. (TAYD). For exploring more A-rated Industrial – Machinery stocks, click here.

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DE shares were trading at $381.20 per share on Tuesday morning, up $0.87 (+0.23%). Year-to-date, DE has declined -10.22%, versus a 19.64% rise in the benchmark S&P 500 index during the same period.

About the Author: Aanchal Sugandh

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns. More...

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