Deere (NYSE: DE) shares were up more than 6% following the company's better than expected Q3 earnings report. The stock is the largest supplier of agricultural equipment and is considered a bellwether for the industrial and ag sectors.
While many parts of the economy are impaired as they deal with high rates, Deere is an exception as it continues to post strong growth. The stock also has a potential catalyst with China reopening despite a surge in coronavirus cases which should boost global growth in 2023.
Overall, shares are up 28% YTD, and analysts are forecasting 30% earnings growth next year. Yet, the stock should also appeal to value investors given its forward P/E of 14. The stock could also have appeal to technicians as it hovers around 52 week highs and looks poised to break out if broad market strength persists.
Inside the Numbers
In Q3, Deere reported $7.44 per share in earnings which beat analysts' expectations of $7.11 per share in earnings. Revenue also beat at $15.5 billion vs $14.4 billion. In total, earnings were up 73%, and revenue was up 37%.
The company's construction and forestry equipment segment saw a 53% increase in revenue, while agricultural products had a 124% jump in revenue.
For its fiscal 2023, the company is projecting net income between $8 billion and $8.5 billion which equates to a 20% increase which is better than analysts' expectations of an 11% gain. The company sees strong spending in the agricultural sector and increased global infrastructure spending as drivers of outperformance in 2023.
It also said that supply chain issues that hampered tractor production during previous quarters were in the rear view mirror. The company has also benefited from higher prices which have translated into higher margins. It said that order books are completely full until the third quarter of 2023 and most of its farm equipment and combines are already sold out.
On the company's conference call, CEO John May remarked: "We executed to our plans, saw substantial lift in production, and outpaced the industry production and retail sales. This resulted in our highest revenue and margin quarter for the year."