Deere Closes Out Fiscal 2022 on a Strong Note and Is Poised to Perform Well in 2023

Deere reported strong fourth-quarter earnings, leading us to raise our fair value estimate to $354 from $332 previously. Global ag demand remains strong and crop supplies are still tight, evidenced by the low stocks/use ratios for corn and soybeans. Management believes it will take a couple of growing seasons to replenish supply shortages, meaning, demand for ag equipment will remain strong in 2023. Furthermore, the replacement cycle in large ag equipment is still underway. Deere commented that large ag volumes in 2023 will likely be 20%-25% below the five-year average volume in the last replacement cycle (2010-14). To us, this shows volume growth still has room to increase from current levels.