Analysts Explains How Deere Stock Tripled in Past Year

USAgNet - 05/07/2021

Farm equipment giant Deere, featured in today's IBD 50 Stocks To Watch, is not your grandfather's stodgy old-school stock.

Thanks to its efforts to improve farming with precision agriculture, also known as satellite farming, investors are seeing Deere stock in a new light. The Illinois-based company has even partnered with NASA's Jet Propulsion Laboratory to help improve its self-driving tractors.

That's helped Deere land a spot in two of popular stock picker Cathie Wood's ARK ETFs: ARK Autonomous Technology & Robotics (ARKQ) and ARK Space Exploration & Innovation (ARKX).

In her first quarter commentary, Wood said: "Among the top contributors were Deere & Co and Virgin Galactic. (Deere) appreciated in anticipation not only of President Biden's infrastructure proposal but also better than expected first quarter results thanks to improved conditions in the agriculture and construction sectors."

The tractor maker scores sound fundamental and technical ratings, too. IBD Stock Checkup assigns Deere stock a 94 Composite Rating. That puts it among the leaders in the seven-stock farm machinery industry group.

A 91 Earnings Per Share Rating, part of the overall composite score, is also solid. Deere's five-year compound earnings growth rate of 19% includes a 12% decline in 2020, as the coronavirus pandemic shut down the global economy. Analysts expect EPS to surge 85% for the current fiscal year ending in October, followed by a 16% increase next year.

Shares surged 10% on Feb. 19, after Deere crushed Wall Street targets on both the top and bottom lines. Earnings soared 137% to $3.87; sales rose 19% to $9.1 billion. The heavy gear maker also offered a bullish outlook for the full year.

"With respect to our outlook, we've seen underlying fundamentals continue to improve since the last quarter," Senior Vice President and CFO Ryan Campbell said on the earnings call, citing higher commodity prices and improved market access. "In addition, we've seen further strength and demand for compact utility tractors and turf equipment, as consumers continue to focus on home and landscape projects."

Analysts expect profit to jump 112% to $4.47 a share on 28% higher sales of $10.5 billion when Deere reports Q2 results on May 21.


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