Replies to post #27994 on The Rising Influence of Rising Affluence

[DewDiligence]

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

[DewDiligence]

Addendum—DE’s Construction & Forestry segment (which accounted for 25% of DE’s overall equipment sales in the most recent quarter) is benefiting from contractors’ inability to hire sufficient labor, which induces the contractors to compensate for the labor shortage by expanding and/or upgrading their machinery. I.e. newer and more technologically advanced equipment requires fewer workers to operate at peak efficiency.

[DewDiligence]

DE reports FY3Q23* results— raises fiscal-year guidance again:

https://www.deere.com/assets/pdfs/common/news/deere-3q23-earnings-release.pdf

FY3Q23 was another excellent quarter in all operating segments. Price increases more than offset increased production costs, and DE expects this to be true during all of FY2023.

• FY3Q23 product sales (excluding revenue from DE’s finance unit) were $14.3B, +10% YoY.

• FY3Q23 GAAP EPS was $10.20, +66% YoY.

DE again raised FY2023 net-income guidance to a range of $9.75-10.0B (up from $9.25-9.50B three months ago and $8.75-9.25B six months ago).

Based on 292M diluted shares @7/31/23, DE’s FY2023 net-income guidance equates to FY2023 GAAP EPS of $33.40-34.25, +43-47% YoY relative to $23.28 in FY2022, and +76-80%(!) relative to $18.99 in FY2021.

At the current share price (~$400 as I’m typing), the FY2023 EPS guidance equates to a FY2023 P/E ratio of about 12.

The stock is down today because investors are apparently concluding that the global agricultural-equipment market cannot get any better.

CC slides:
https://s22.q4cdn.com/253594569/files/doc_financials/2023/q3/DE-3Q23-Earnings-Call-Presentation.pdf

*DE’s fiscal years end on Oct 31; FY3Q23 spanned the period from 5/1/23 to 7/31/23.