Credit Suisse Thinks Strength Across Segments Positions Deere In Spotlight

Credit Suisse Thinks Strength Across Segments Positions Deere In Spotlight
  • Credit Suisse analyst Jamie Cook reiterated an Outperform rating on the shares of Deere & Company DE and raised the price target from $447 to $582.
  • Deere's Q4'22 sales jumped 40% on an 81% increase in EPS.
  • The Q4 beat was driven by strength across all segments. P&PA sales of $7.434 billion rose 59% and operating margins were 23.4%, jumping 670 basis points from 16.7% last year, reflecting higher production rates, said the analyst.
  • RelatedDeere Clocks Strong Q4 Performance Despite Inflation, Signals Strong FY23 Profit
  • For 2023, Deere introduced net income guidance of $8.0-$8.5 billion, which was 5% above the street reflecting strong pricing, healthy industry outlook, and extended visibility into next year.
  • Cook added that Deere's order book for large AG is full through Q3 FY23 and order velocity remains strong.
  • Despite macro concerns, Deere is also seeing strong demand for Construction equipment, with the order book extending into 2H FY23, as oil and gas, infrastructure stimulus starts to kick in.
  • Small AG demand remains resilient which is reflected in the order book for midsized tractors, which is 70% full through the third quarter 2023.
  • Deere expects to continue to generate cash despite organic and inorganic investment with CFO forecast at $9-9.5 billion and sees opportunity to continue to buy back stock similar to Q4 levels which was north of $1 billion.
  • Cook said the company expects 2023 to be another strong year based on positive farm fundamentals and fleet dynamics as well as increased investment in infrastructure supporting healthy demand for equipment.
  • Also ReadDeere To Jump Over 33%? These Analysts Boost Price Targets On The Agricultural Equipment Manufacturer Following Q4 Results
  • Price Action: DE shares are trading higher by 0.82% at $441.11 on the last check Friday.
  • Photo Via Wikimedia Commons

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