Deere and Co (DE)

[DewDiligence]

From today's CC—DE's C&F* segment is benefiting from contractors who are ordering more capital equipment to compensate for the labor shortage.

*Construction and Forestry.

[bar1080]

Don't know about forever, but several of my investments are with firms over 100 years old. Deere may be the oldest among my holdings, dating back to 1837.

https://en.wikipedia.org/wiki/John_Deere_(inventor)

[DewDiligence]

DE is a buy-and-hold-forever kind of stock, IMO. I don’t sweat the small stuff.

[bar1080]

That was quite a swing. I almost always buy shares in about 4 stages with each spaced about 6 weeks apart to deal with the FACT that most trades are made at the very worst times. (there are plenty of academic studies that show that). Humans are terribly wired -- probably from birth -- for investing. So the goal is to buy and sell coldly, with little emotion. I have several DE buys to make yet.

[DewDiligence]

Recession?

Today we have yet another data point from DE (#msg-171947205) to supplement the recent data point from CAT (#msg-171784334) to argue against a near-term economic downturn.

True, both DE and CAT have special tailwinds, but we can’t simply dismiss the stellar performance of these two bellwethers from the outlook for the global economy.

[DewDiligence]

How can the FY2023 P/E ratio be only 12? Because many investors still (wrongly, IMO) consider DE a textbook cyclical company and hence they think the current business conditions will get worse when the cycle turns down.

[DewDiligence]

DE FY2Q23 CC slides:

https://s22.q4cdn.com/253594569/files/doc_financials/2023/q2/DE-2Q23-Earnings-Call-Presentation.pdf

[DewDiligence]

DE reports FY2Q23* results—raises fiscal-year guidance again:

https://s22.q4cdn.com/253594569/files/doc_financials/2023/q2/DE-2Q23-News-Release-and-Financials.pdf

FQ2Q23 was another superb quarter with volume and pricing gains in all three operating segments. Price increases more than offset increased production costs, and DE expects this to be true during all of FY2023.

• FY2Q23 product sales (excluding revenue from DE’s finance unit) were $16.1B, +34% YoY.

• FY2Q23 GAAP EPS was $9.65, +42% YoY.

DE again raised FY2023 net-income guidance to a range of $9.25-9.50B (up from $8.75-9.25B three months ago and $8.0-8.5B six months ago).

Based on 297M diluted shares @4/30/23, DE’s FY2023 net-income guidance equates to FY2023 GAAP EPS of $31.10-32.00, +34-37%(!) relative to $23.28 in FY2022, and +64-69%(!!) relative to $18.99 in FY2021.

At the current share price ($385.50 as I’m typing), the FY2023 EPS guidance equates to a FY2023 P/E ratio of 12.

*DE’s fiscal years end on Oct 31; FY2Q23 spanned the period from 2/1/23 to 4/30/23.

[Gpheart2016]

What happened? $386, then it drops to $372?

[bar1080]

"Deere tops Q2 profit views on strong sales, raises annual income outlook"

"(Reuters) -Deere & Co on Friday topped Wall Street profit expectations on strong sales of its tractors and precision agriculture equipment, and raised its net income forecast for the rest of the year as its order books remain robust.

Shares in the world's largest farm equipment maker were up 3.6% in premarket trading after the company reported a 36% rise in second-quarter profit."

"The Moline, Illinois-based company has sustained margin improvements by mitigating cost pressures across its equipment divisions as well as constraints in supply chains that are only now moderating for most industrial companies."

Deere posted earnings per share of $9.65, outpacing analysts' estimates of $8.59.

https://finance.yahoo.com/news/deere-raises-fy-profit-outlook-101348804.html

[bar1080]

Howard Buffett & Deere

[bar1080]

DD, I buy the highest quality growth stocks and almost never sell them. I can't figure out why Berkshire no longer owns Deere shares even with Warren's son, Howard Buffett, an enthusiastic long time Deere farmer. Berkshire Hathaway owned millions of DE shares around 2014.

Howard Buffett on Deere Tractor

[bar1080]

Deere Q Dividend Growth

  Date     	 Dividends 
 Mar 30, 2023	1.25 Dividend 
 Dec 29, 2022	1.20 Dividend 
 Sep 29, 2022	1.13 Dividend 
 Jun 29, 2022	1.13 Dividend 
 Mar 30, 2022	1.05 Dividend 
 Dec 30, 2021	1.05 Dividend 
 Sep 29, 2021	1.05 Dividend 
 Jun 29, 2021	0.90 Dividend 
 Mar 30, 2021	0.90 Dividend 
 Dec 30, 2020	0.76 Dividend 
 Sep 29, 2020	0.76 Dividend 
 Jun 29, 2020	0.76 Dividend 
 Mar 30, 2020	0.76 Dividend 
 Dec 30, 2019	0.76 Dividend 
 Sep 27, 2019	0.76 Dividend 
 Jun 27, 2019	0.76 Dividend 
 Mar 28, 2019	0.76 Dividend 
 Dec 28, 2018	0.76 Dividend 
 Sep 27, 2018	0.69 Dividend 
 

[Bountiful_Harvest]

John Deere hopes to release an all-electric tractor by 2026:

https://www.rfdtv.com/john-deere-hopes-to-release-an-all-electric-tractor-by-2026

[DewDiligence]

DE seeking satellite company_to_deliver_real-time_planting/harvesting_data_to_remote_areas_of Brazil:

https://www.wsj.com/articles/deere-seeks-satellite-network-to-connect-far-flung-farms-65c37b0f

Brazil is the number-2 market for DE's large (and technology-rich) agricultural equipment.

[Muddy2]

My mom left me a nice position in DE when she passed in 2017. Some bumps here and there, but a good ride.

Any reason to bail?

[Bountiful_Harvest]

John Deere discussing driverless tractors:

https://www.thetelegraph.com/news/article/future-autonomous-farming-equipment-taking-shape-17856386.php

https://finance.yahoo.com/news/bull-day-deere-co-090009744.html

[DewDiligence]

DE boosts dividend again:

https://finance.yahoo.com/news/deere-company-raises-dividend-174800137.html

Just two months ago DE raised the annualized dividend to $4.80 (#msg-170637030), and today DE is boosting it again to $5.00.

At the current share price (~$427), the new annualized payout is a yield of 1.2%.

DE, which considers itself a technology growth company rather than an industrial cyclical, has never been a big dividend payer; however, DE has now boosted the dividend by a cumulative 39% ($3.60 to $5.00) in the past 1.5 years.

[MiamiGent]

DE Looking for follow through Tuesday.

https://stockcharts.com/h-sc/ui?s=RE

[DewDiligence]

DE FY1Q23 CC transcript:

https://finance.yahoo.com/news/q1-2023-deere-co-earnings-061708790.html

[DewDiligence]

DE FY1Q23* results (corrected)†

FQ1Q23* was another superb quarter with volume and pricing gains in all three operating segments. Price increases more than offset increased production costs, and DE expects this to be true during all of FY2023.

• FY1Q23 product sales (excluding revenue from DE’s finance unit) were $11.40B, +34% YoY.

• FY1Q23 GAAP EPS was $6.55, +127% YoY.

DE raised FY2023* net-income guidance by $750K to a range of $8.75-9.25B. Based on 299M diluted shares @1/31/23, the net-income guidance range equates to FY2023 GAAP EPS of $29.26-30.94, representing a YoY increase of 26-33%.

At the current share price (~$425 as I’m typing), the above EPS range represents a FY2023 P/E ratio of only 14-15.

*DE’s fiscal years end on Oct 31; FY1Q23 spanned the period from 11/1/22 to 1/31/23.

†My previous version of this post had incorrect numbers for DE’s 2023 net-income guidance.

[DewDiligence]

DE acquiesces on “right to repair” issue:

https://finance.yahoo.com/news/1-farm-bureau-deere-co-165457932.html

The American Farm Bureau Federation and machinery manufacturer Deere & Co signed a memorandum of understanding on Sunday that ensures farmers have the right to repair their own farm equipment or go to an independent technician.

As the agriculture sector accelerates its adoption of technology, the reliance on high-tech machinery such as GPS-guided combines and tractors has become more commonplace.

But equipment makers such as Deere have generally required customers to use their parts and service divisions for repairs and until recently, only allowed authorized dealers the means and tools to access the complex computerized systems of their tractors and other machinery.

[DewDiligence]

USDA expects_record—($161B)—US_net farm income in_2022, +20% YoY:

https://www.wsj.com/articles/high-commodity-prices-feed-a-boom-in-the-u-s-farm-belt-11671595947

Bullish for DE. The more profit farmers earn, the more they spend on new equipment and technology services tied to that equipment.

[DewDiligence]

DE boosts annualized dividend to $4.80—(from $4.52):

https://finance.yahoo.com/news/deere-company-raises-dividend-six-190400945.html

At the current share price (~$440), the new payout is a yield of ~1.0%.

DE, which considers itself a technology growth company rather than an industrial cyclical, has never been a big dividend payer, but it has now boosted the dividend by a cumulative 33% ($3.60 to $4.80) in 2021 and 2022.

[DewDiligence]

(Rhetorical)

[DewDiligence]

Recession?

We now have DE’s blowout results and bullish guidance (#msg-170523741) to supplement CAT’s blowout results and bullish guidance (#msg-170300076).

Can these two bellwethers both be totally wrong?

[DewDiligence]

Addendum—DE’s FY4Q22 price increases more than offset increased production costs, and DE expects this to be true again during all of FY2023.

[MiamiGent]

DEERE & CO
$438.55 +21.90 (+5.28%)
As of Nov-23-202212:02:55 PM ET
https://stockcharts.com/h-sc/ui?s=DE

[DewDiligence]

DE FY4Q22* results…

In FQ4Q22, DE logged impressive volume and pricing gains in all three operating segments. The strong US dollar crimped ex-US sales, but this was scarcely noticeable in the overall picture.

PR:
https://www.sec.gov/Archives/edgar/data/315189/000155837022018162/de-20221123xex99d1.htm

CC slides:
https://investor.deere.com/files/doc_financials/2022/q4/DE-4Q22-Earnings-Call-Presentation.pdf


FY4Q22: Sales $15.5B, +37% YoY; GAAP EPS $7.44, +81% YoY.

FY2022 (12m): Sales $52.6B, +19% YoY; GAAP EPS $23.28, +23% YoY.

DE is today issusing guidance for FY2023* of $26.67-28.33 (based on 300M diluted shares), representing a YoY increase of 15-21%.

At the current share price (~$430), the above EPS range represents a FY2023 P/E ratio of 15-16.

*DE’s fiscal years end on Oct 31.

[MiamiGent]

DE Deere beats, top & bottom

EPS actual 7.44. Consensus 7.08
Revs actual 15.54B. Consensus 13.39B

https://stockcharts.com/h-sc/ui?s=DE

DEERE & CO
$416.56 +4.86 (+1.18%) Close

pre market hours active
Pre-market
$430.06 +13.50 (+3.24%)

[DewDiligence]

The stock was initially down about 4% in PM trading, but it is now flat. The CC started at 10am ET.

[DewDiligence]

FY3Q22 CC slides:

CC slides:
https://s22.q4cdn.com/253594569/files/doc_financials/2022/q3/DE-3Q22-Earnings-Call-Presentation.pdf

[DewDiligence]

DE FY3Q22* results—lowers FY2022* EPS guidance slightly…

https://s22.q4cdn.com/253594569/files/doc_financials/2022/q3/DE-3Q22-News-Release-and-Financials.pdf

DE experienced high-single-digit YoY inflation in raw materials and other cost-of-sales inputs, but more than offset these increases with ~10% price YoY increases.

New FY2022 GAAP EPS guidance is $22.95-23.60 (based on 305M diluted shares), down about $0.25 from the guidance three months ago at both the lower and higher bounds of the guidance range, but still up sharply from the guidance $20.70-22.30 nine months ago.

DE’s FY2022 GAAP guidance includes a $220M ($0.71/sh) non-recurring gain in FY2Q22; without thise non-recurring item, FY2022 EPS guidance would be $22.24-22.89. At the current share price (~$364), the above EPS range represents a FY2022 P/E ratio of 15.9-16.4.

*DE’s fiscal year ends on Oct 31.

[DewDiligence]

DE FY3Q22 earnings preview (Reuters):

https://finance.yahoo.com/news/deeres-sales-expected-rise-increased-201802171.html

[Lowjack]

By sustainable, do you mean shipping jobs to Mexico, or failing to provide parts and tools to repair their equipment?

[DewDiligence]

DE’s 2021 Sustainability Report:

https://www.deere.com/en/our-company/sustainability/sustainability-report/

[Canna_Business]

Does this company focus on soil revitalization?

[DewDiligence]

DE’s technology/autonomy webcast:

https://investor.deere.com/home/default.aspx#analyst

If the data depict some kind of “edge” condition, the vehicle is simply stopped, an option not available with robocars!

[DewDiligence]

DE raises annualized dividend to $4.52 (from $4.20):

https://www.sec.gov/Archives/edgar/data/0000315189/000155837022009334/de-20220525xex99d1.htm

At the current share price (~$340), the new annualized payout represents a yield of 1.3%.

DE has never been a high-dividend payer, but it increases the dividend often. Today’s increase is the third in the past 15 months.

[DewDiligence]

DE raises FY2022* EPS guidance again…

FY2Q22 PR:
https://s22.q4cdn.com/253594569/files/doc_financials/2022/q2/DE-2Q22-News-Release-and-Financials.pdf

CC slides:
https://s22.q4cdn.com/253594569/files/doc_financials/2022/q2/DE-2Q22-Earnings-Call-Presentation.pdf


New FY2022 GAAP EPS guidance is $22.73-24.03 (based on 308M diluted shares), up from the prior guidance of $21.30-22.60 three months ago and up further from the prior guidance $20.70-22.30 six months ago.

DE’s FY2022 GAAP guidance includes a $220M ($0.71/sh) non-recurring gain in FY2Q22; without the non-recurring item, FY2022 EPS guidance would be $22.02-23.32. At the current share price (~$337), the above EPS range represents a FY2022 P/E ratio of 14.5-15.3.

Despite all of the above, the stock is down ~7% as I’m typing. Some investors may think that FY022 represents the top of the cycle and that things can’t get any better.

*DE’s fiscal year ends on Oct 31.

[Bountiful_Harvest]

New John Deere Tractors Plow Day and Night With No One in the Cab: Autonomous Farming Debuts in 2022:

https://www.goodnewsnetwork.org/new-john-deere-autonomous-farming-tractors-debut-in-2022/

[Bountiful_Harvest]

https://kutv.com/features/fresh-living/how-john-deere-is-supporting-modern-farmers

[DewDiligence]

Another write-up on DE’s amazing run:

https://finance.yahoo.com/news/deere-soars-ukraine-war-stokes-164402006.html

The sharp rally in the shares since the beginning of Russia’s invasion of Ukraine nearly a month ago has led to a 25% gain this year, making Deere the top gainer in the 72-member S&P 500 Industrials Index.

…Prices of crops such as wheat and soybeans have soared in recent weeks amid fear of looming disruption for crop supplies from Ukraine. …As a result, some estimate that Ukraine, which is a major exporter of wheat, corn and sunflower oil, may only plant about half a normal sunflower crop and a third less corn than last year. That reduced production will invariably cause prices to rise.

Rising grain prices, however, is typically good news for farmers and farm incomes. And that, in turn, is good for agriculture machinery makers like Deere and AGCO Corp.

…On the other hand, the gaps in the global crop supply created by the loss of the production capacity of Russia and Ukraine will also need to be filled. All together, it creates the perfect environment for a significant uptick in demand for farm equipment.

[DewDiligence]

DE suspends shipments to Russia/Belarus:

https://finance.yahoo.com/news/deere-co-suspends-shipments-russia-193710522.html

Deere & Co. has had a presence in Russia dating back to 1973. The company has an office in St. Petersburg and a manufacturing and parts distribution facility south of Moscow in Domodedovo.

[DewDiligence]

The dissolution of the Deere-Hitachi JV has finally closed:

https://finance.yahoo.com/news/john-deere-acquires-deere-hitachi-220000657.html

[DewDiligence]

DE raises FY2022* profit guidance despite headwinds…

FY1Q22 PR:
https://www.deere.com/en/news/all-news/fy22-first-quarter-earnings/

CC slides:
https://investor.deere.com/files/doc_financials/2022/q1/DE-1Q22-Earnings-Call-Presentation.pdf

New FY2022 GAAP EPS guidance is $21.30-22.60 (based on 314M diluted shares), up from the prior guidance of $20.70-22.30 three months ago.

*DE’s fiscal year ends on Oct 31.

[Bountiful_Harvest]

Is John Deere an Underrated AI Stock?

https://www.fool.com/investing/2022/01/28/is-john-deere-an-underrated-ai-stock/

[DewDiligence]

A glaring shortcoming of the Barron’s excerpt I just posted is:

#msg-167521140

[DewDiligence]

The ESG angle mentioned in the previous post (farmers using fewer chemicals as a consequence of precision ag) is rather dubious, IMO, but that’s a small matter in the overall evaluation of the investment thesis. DE could become a genuine ESG company when they start selling battery-driven tractors and combines.

[DewDiligence]

Barron’s Roundtable excerpt on DE:

https://www.barrons.com/articles/roundtable-2022-stock-market-investing-opportunities-51642216617

The first leg of the story was based on the agricultural-equipment upgrade cycle. The fleet was old, and as farmers upgraded, profitability would be on the rise. Now we are rolling through what we think is a decade-long story centered on innovations in precision agriculture.

…Deere’s stock can return an average of 15% over the next three years, which implies a $550 stock price in 2024, inclusive of a 1% dividend yield. It trades for 18 times estimated 2025 earnings.

…The take rate on precision ag is getting into an S-rate adoption curve as combines are turned into data centers, connected to spectrum, and connected to Deere’s operations centers. As a result of data optimization, farmers are using less pesticides and fertilizers, and producing crops with less water. Deere is a great ESG story.

The precision-ag business within Deere is hard to unpack because the company doesn’t fully disclose the numbers. We think it was about a $2 billion business last year, on its way to $3 billion in 2023. Long term, the [total addressable market] could be upward of $50 billion, if you think about the crop-yield improvement.