Deere Earnings Are Coming. The Stock Needs a Beat.

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Agricultural machinery giant

Deere

reports its fiscal first-quarter earnings Friday morning. Investors could really use a “beat-and-raise” quarter from the company.

Deere

stock (ticker: DE) outperformed the

S&P 500
in 2022, rising 27% while the index dropped 18%. But shares are down 5% so far this year while the S&P is up 7%. A beat might help close that performance gap.

Still, the fiscal first quarter isn’t the be-all and end-all for Deere. It’s a seasonally weak period following the U.S. harvest and normal farm-buying patterns. Wall Street is looking for earnings per share of $5.57 from $11.3 billion in equipment sales. (Deere also generates revenue from lending operations.)

A year ago, Deere earned $2.92 a share from $8.5 billion in equipment sales.

Earnings will matter, with investors paying particular attention to cost trends. But forward-looking guidance might be even more important to watch.

Deere provided its initial outlook for fiscal year 2023 in November. The company expects net income between $8 billion and $8.5 billion. At the time, Wall Street was looking for guidance of about $7.9 billion.

Stronger guidance would help soothe investor nerves that started fraying when, in early February, the USDA projected U.S. net farm income would fall 15.9% to $136.9 billion in calendar year 2023. Farm income determines, in part, what farmers buy and what Deere can charge.

The absolute level of farm income is strong: 2022 was a banner year with farm income at its highest level since the 1970s when adjusted for inflation. Still, the expected decrease this year will drive questions about equipment demand.

Management will host a conference call at 10 a.m. ET Friday to discuss results.

Options markets imply Deere shares will move about 4%, up or down, following earnings. Shares rose about 5% after Deere reported its fiscal-fourth-quarter numbers in November.

Write to Al Root at [email protected]