Deere's Quarterly Earnings Show Promise

Deere, a leading agricultural machinery manufacturer, is expected to report positive quarterly earnings based on the performance of its industry counterparts.

Positive Indicators from CNH Industrial

CNH Industrial, which recently released its fourth-quarter earnings and 2024 guidance, has managed to meet investors' expectations. While the company's sales and earnings have experienced a decline, the results were not as dire as initially anticipated. As a result, CNH Industrial's stock experienced a 6.2% increase, indicating that investors were preparing for worse outcomes.

According to CNH CEO Scott Wine, the current market conditions are far more favorable than in previous cycles. He points out that in the past, there was an excess of leased machinery, a surplus of used inventory, and significantly low pricing. However, the situation has significantly improved, with inventories, pricing, and average equipment age working in the company's favor. This improvement is attributed in part to the challenges faced by the industry due to the COVID-19 pandemic, which led to constrained production. Moreover, farmers are increasingly adopting advanced precision technology such as smart planters and self-driving tractors, further bolstering CNH Industrial's prospects.

Comparable Results from AGCO

AGCO, another major player in the industry, also reported its fourth-quarter earnings in February. The company's results mirrored those of CNH Industrial. AGCO's guidance aligned with Wall Street's expectations, and a decline in sales and earnings is projected for the year 2024 compared to 2023. In response to these results, AGCO's stock saw a 1% increase.

In summary, Deere is likely to follow suit with its peers and deliver promising quarterly earnings. The overall outlook for the agricultural machinery sector appears positive despite temporary setbacks caused by market conditions and external factors.

Deere to Report Q1 Earnings: What to Expect

Investors are eagerly awaiting Deere's fiscal first-quarter earnings report, which is set to be released on Thursday before the market opens. According to FactSet, analysts are anticipating earnings per share (EPS) of $5.26 from sales of $10.3 billion for the quarter. This compares to EPS of $6.55 from sales of $11.4 billion reported by Deere in the same quarter last year.

In addition to the financial results, investors will be looking for updated guidance. Deere had previously stated that EPS for fiscal year 2024 would fall within the range of $28.60. However, Wall Street's current estimate stands at $28.72, reflecting a decrease from the $33.62 earned in fiscal year 2023.

The agricultural machinery sector has faced a gloomy outlook in recent times. Over the past 12 months, shares of Deere, CNH, and AGCO have experienced declines of approximately 6%, 24%, and 17% respectively. In contrast, the S&P 500 has seen a growth of around 21% during the same period.

As a result of this decline, Deere's shares are currently trading at 13.2 times the estimated earnings for calendar year 2024. In comparison, AGCO and CNH shares trade at 8.7 times and 8.2 times respectively. The S&P 500 has a trading multiple of approximately 20 times. While it may not be realistic to expect these companies to trade at the same levels as the broader market, there is an argument to be made that their shares deserve better valuation.

In conclusion, all eyes will be on Deere's upcoming earnings report and any updated guidance provided. Investors will be closely analyzing the results to gain insights into the performance and prospects of the agricultural machinery industry.