Deere is Friday's IBD Stock Of The Day, as the leading farm equipment manufacturer forms a new base on the back of strong quarterly earnings and expectations of accelerated profit growth in 2023.
John Deere, best known for its tractors and heavy equipment, has seen shares gain around 25% on the year, boosted by a 133% quarterly profit gain in Q2 compared to Q1. Earnings jumped to $6.81 per share in the second quarter, then dropped by 9% in Q3 before adding another 20% in Q4.
Analysts are expecting strong quarterly profits in 2023 as well. Deere, along with other companies, should see a boost from the federal infrastructure spending bill and the Inflation Reduction Act. The infrastructure spending plan, which was approved last fall, will dole out more than $500 billion for various projects. And the Inflation Reduction Act includes $369 billion to expedite mining projects and build out renewable energy infrastructure.
However, there are possible macroeconomic road blocks to growth for the Illinois-based company. The war between Russia and Ukraine could cause long lasting supply shortages for farm equipment and agricultural goods. Inflation and the high cost of goods and services could also take its toll.
John Deere stock is a Big Cap 20 and IBD 50 growth leader and a top stock to watch.
John Deere Stock
Deere stock edged down 0.4% to 426.87 Friday during regular market trade. On the week, shares shed around 2.3%. Deere stock has been trading tightly, pulling back below its 10-week line. DE shares are above their 50-day moving average.
The stock is building a flat base which should be valid at the start of trade Tuesday. The Nov. 23 high marks 448.50 as the buy point, according to MarketSmith analysis.
However, the stock market is now in a correction, despite Thursday's bounce. Investors should be wary of taking new positions.
In November, the company beat earnings and revenue estimates for its fiscal fourth quarter, despite supply headwinds. EPS ballooned 80% to $7.44 and sales advanced 39% to $14.35 billion. Deere also gave an optimistic 2023 outlook in November.
The farming equipment manufacturer expects fiscal 2023 net income of $8 billion-$8.5 billion, above consensus and up from $7.13 billion in fiscal 2022. Analysts surveyed by FactSet now see Deere earnings per share of $5.52 on sales of $11.41 billion in Q1 2023. That would represent 89% EPS growth and revenue growth of 34%.
IBD ranks John Deere stock first in the Machinery-Farm industry group. DE shares have a Composite Rating of 99 out of 99. Its Relative Strength Rating is 94; the RS Rating is an exclusive IBD Stock Checkup gauge for share price movement, with a 1-99 score. The EPS Rating is 96.
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