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Nearing the end of harvest season, Deere's bottom-line has fared
well in what analysts said has been a bull market for
agriculture this year. Strong demand and not enough supply gave
Deere the pricing power needed to help offset rising raw
material, production and shipping costs for the fiscal year
ending on Oct. 31.
The Moline-Illinois based company continues to navigate
uncertain global economic conditions and supply chain tightness
that has kept dealer inventories low. Even as supply chain
challenges start to ease, analysts said it is hard to predict
the availability of parts Deere will need to assemble machines.
"The make or break this quarter will really be on the supply
chain. The demand side of the equation hasn't wavered and
remains quite strong," Jefferies analyst Stephen Volkmann said.
The farm equipment-maker's full-year profit outlook was dragged
down last quarter after earnings fell below Wall Street's
consensus due to rising interest expenses and an inability to
make enough large tractors.
Danielle Shay, a vice president at Simpler Trading was not
bothered by the miss because she is confident Deere will be able
to recoup sales.
Deere has outperformed the Dow Jones Industrial Average, with
shares up 18% year-to-date. For the fourth quarter, the company
is expected to report $2.16 billion in net income, or $7.12
earnings per share, on revenue of $13.38 billion, according to
Refintiv data.
Demand for tractors and combines has not shown signs of slowing
down despite rising interest rates, but analysts are watching
whether producers may start to scale back on equipment
purchases.
"That's something that we watch closely," said Eric Greaser, a
senior analyst at Moody's. "We're waiting to see if this rising
interest rate environment will impact the financing of
equipment."
(Reporting by Bianca Flowers; Editing by Anna Driver)
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