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Deere (DE) Hits 52-Week High on Solid Q2 & Bright Prospects

Zacks Equity Research

Shares of Deere & Company DE crafted a 52-week high of $122.50 on May 23, before closing lower at $121.71, backed by strong second-quarter fiscal 2017 results.

Deere has a market cap of roughly $38.7 billion. The average volume of shares traded in the last three months is around 2.3M.

The stock delivered a solid one-year return of around 52.8%. The company beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average positive surprise of 70.41%.

Deere & Company Price and Consensus


Deere & Company Price and Consensus | Deere & Company Quote

Price Movement

Year to date, Deere has outperformed the Zacks classified Machinery-Farm sub-industry with respect to price performance. The stock rallied 52.9%, while the industry recorded growth of 45.5% over the same time frame.

Driving Factors

In the fiscal second quarter, Deere’s earnings and revenues improved on a year-over-year basis, and also beat the Zacks Consensus Estimate on both the counts. The company’s shares gained 8.77% in pre-market trading on May 19, after posting solid results.

The company is anticipated to gain from a durable business model and wide range of revenue sources. Its execution of operating plans, disciplined cost management and a broad product portfolio also remain tailwinds.

Deere raised its equipment sales growth projection to roughly 9% year over year for fiscal 2017. The company foresees equipment sales to rise about 18% in third-quarter fiscal 2017 compared with the year-ago period. For fiscal 2017, Deere also raised its outlook for net sales to climb 9% year over year and net income at $2.0 billion.

Deere estimates Agriculture and Turf equipment sales to increase about 8% in fiscal 2017. In South America, industry sales of tractors and combines are likely to jump about 20% on the back of improving economic and political conditions in Brazil and Argentina. Sales in Asia are projected to remain nearly flat, triggered by higher sales in India.

Further, Deere anticipates turf and utility equipment sales in the U.S. and Canada to remain nearly flat in fiscal 2017. The company foresees global sales for Construction & Forestry equipment to be up about 13%, with no material currency-translation impact. The outlook for net income from Financial Services has been set at $475 million for fiscal 2017.

Deere currently carries a Zacks Rank #2 (Buy).

Other Key Picks

Other top-ranked stocks in the same space include AGCO Corp. AGCO, Altra Industrial Motion Corp. AIMC and Applied Industrial Technologies, Inc. AIT. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AGCO has a remarkable positive average earnings surprise of 40.39% for the last four quarters. Altra Industrial Motion generated a positive average earnings surprise of 15.93% over the trailing four quarters. Applied Industrial Technologies has delivered an average positive earnings surprise of 9.78% in the past four quarters.

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