Should I buy Deere & Company shares after the Q4 results?
Deere & Company (NYSE: DE) shares have advanced more than 25% since the beginning of October 2022; the company reported better than expected fourth quarter this Wednesday, and it expects to see strong trends in the 2023 fiscal year.
Deere expects to see strong trends in the 2023 fiscal year
Deere & Company manufactures various equipment worldwide and operates through three segments: agriculture and turf, construction and forestry, and financial services.
Deere shares have been moving in an uptrend last several trading weeks, and the company’s business has proven stable throughout the fourth fiscal quarter.
Deere & Company reported better-than-expected fourth fiscal quarter results this week; total revenue has increased by 39.6% Y/Y to $14.35 billion, while the GAAP EPS was $7.44 (beats by $0.34).
The company’s profit from large farm equipment more than doubled; still, it is important to note that quarterly sales and profit also jumped because of rising prices and higher product shipments as supply-chain bottlenecks for parts eased.
Total revenue has increased above expectations (+890 million), and John C. May, CEO of the company, said that he is looking forward to another strong year in 2023 based on positive farm fundamentals and fleet dynamics, as well as increased investment in infrastructure. John C. May added:
These factors are expected to support healthy demand for our equipment. At the same time, we have confidence in the smart industrial operating model and our ability to deliver solutions that help our customers be more profitable, productive, and sustainable.
Deere’s business continues to grow, and the company demonstrated once again the ability to, even in these tough times, it can achieve excellent results.
Despite this, potential investors should keep in mind that with a market capitalization of $132 billion, Deere is not inexpensive, and there are better investment opportunities at the moment.
According price-to-sales ratio (market capitalization/revenues), Deere shares are trading at 2.75, which is higher than the price-to-sales ratio of Caterpillar Inc (NYSE: CAT), which is trading at a P/S of 2.28.
The current dividend yield of 1% also doesn’t seem attractive in the current economic situation, where the U.S. Federal Reserve continues to act aggressively.
Deere shares continue to trade near record highs, the book value per share is around $67, and if the U.S. stock market enters a more significant correction phase, the share price could be at much lower levels.
Bulls control the price movement
Deere’s share price has been advancing last several weeks, and for now, bulls control the price movement.
Technically looking, Deere shares could advance above the current price levels in December 2022, especially if the Federal Reserve hints at slowing the pace of rate increases. Still, potential investors should keep in mind that at the current price, Deere shares are not inexpensive.
Data source: tradingview.com
The strong support level stands at $400, and if the price falls below this level, the next target could be $350.
Deere & Company reported better than expected fourth quarter this Wednesday, and it expects to see strong trends in the 2023 fiscal year. Deere shares have advanced more than 25% since the beginning of October 2022, but investors should keep in mind that Deere shares are not inexpensive at the current price.
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