Expectations are rising for Deere’s coming earnings report.
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Deere stock is suddenly on fire, rising for three consecutive days and setting records in the process.
Deere investors are apparently unfazed by inflation, rising interest rates, or the Omicron variant of Covid-19. There is a good reason for that.
On Wednesday, Deere (ticker: DE) shares closed at $395.40, up 1.4%. That’s a record close for the maker of green-colored farm implements, according to Dow Jones Market Data. Shares traded as high as $399.63; that is the highest intraday level since May 10, 2021, when they hit $400.34. Deere stock has jumped 15% year to date, far better than the 4% and 2% respective drops of the S&P 500 and Dow Jones Industrial Average.
Deere shouldn’t get credit for the rise, though. Credit instead should go to a competitor, CNH Industrial (CNH). CNH is short for Case New Holland , the maker of red farm equipment.
Case reported better-than-expected fourth-quarter numbers Tuesday, and said sales should grow between 10% and 14% in 2022. It was a bullish outlook, and CNH shares rose 3.4% Tuesday and another 5.1% Wednesday.
“New and used equipment inventories are at historically low levels and average fleet age in North America is at a two-decade high,” said CNH Industrial CEO Scott Wine on his company’s conference call. There are supply-chain problems and cost inflation, but an aging fleet is a powerful tailwind for farm equipment demand.
That helps CNH, but everyone associates Deere with farming first. Now investors are expecting Deere to report good numbers and provide strong guidance when its fiscal first-quarter results come out on Feb. 18. (Deere’s fiscal year ends in October.)
Back in November, Deere said fiscal year 2022 net income would be between $6.5 billion and $7 billion. The company earned about $6 billion for fiscal year 2021.
Whether Deere can beat earnings expectations and keep the stock’s momentum up is anyone’s guess. And whether shares of Deere or CNH are attractive now is for individual investors to decide.
Deere stock is trading at about 17 times estimated calendar year 2022 earnings. CNH is trading for about 12 times earnings. The market trades for about 21 times earnings. Valuation, of course, is only one factor in determining which stocks to buy.
Deere could be on its way to another all-time high on Thursday—its stock is up 0.4% to $396.99 in premarket trading.
Write to Al Root at [email protected]
