Deere Earnings: Strong Demand and Improving Supply Chains Lead Management To Raise Guidance

Deere reported strong earnings to close out its fiscal second quarter. After adjusting our near-term sales and margin forecast, we raised our fair value estimate to $377 from $369 previously. So far, 2023 is shaping up to be another strong year for the ag leader. Through the first two quarters, equipment sales have increased by nearly 32% on average, running at a similar level to how Deere closed fiscal 2022. There are a couple of factors driving the company’s strong performance. First, the company has benefited from strong price realization. Most of the price increases have been a result of cost inflation, but the company continues to call out that new technology features will be a key driver to pricing in the future. Deere’s strong brand and competitive positioning leads to pricing power, in our view.