A company known for its reliability should provide investors with something they can count on
John Deere (NYSE:DE† is expected to report earnings before the market opens on May 20. And right now, any bit of good news would have a calming effect on the markets. With that in mind, John Deere might just be the right company at the right time.
The company is expected to generate revenue in line with analyst expectations of approximately $13.1 billion. But now it’s all about revenue. And the good news for investors is that Deere is expected to reach earnings per share of $6.80. That would be higher than the consensus estimate of analysts followed by MarketBeat giving DE shares an EPS of $6.67.
Will the earnings be enough to calm the markets?
The answer is that it may not calm them down, but it can act like a shot of novocaine. The markets hate uncertainty. And while John Deere only appeals to one sector of the market, it could provide investors with a measure of certainty.
Agriculture stocks were among the most popular stocks before this sell-off. However, unlike some other sectors, the general statement for this sector has not changed. Commodity prices continue to rise. Food shortages remain a real possibility as a significant amount of world wheat is shut down in Ukraine.
Investors may be given a second chance
At the start of the Russian invasion of Ukraine, I raised concerns about DE shares† My concern was largely about the company’s small (but not non-existent) exposure to Russia. And the stock initially fell. However, it quickly recovered and posted a gain of about 30%.
But stocks are repriced across the board and DE stocks are no different. It is down about 16% from its highs. But this can give opportunistic and risk-tolerant investors a second chance to grab stocks at a more favorable price.
Deere has an attractive valuation with a price-to-earnings ratio (P/E) of just over 20 at the time of writing. And the company’s revenues and earnings are expected to make strong gains over the next five years. In addition, investors should not ignore the dividend, which currently pays $4.20 per year.
A technology game?
John Deere becomes one of the leaders in the emerging agricultural technology sector. The company plans to ship its first fully autonomous tractor sometime in late 2022. And that’s not the only new technology Deere is introducing. The company is also developing a crop sprayer that is supported by machine learning.
Deere, in turn, is trying to meet the need to feed a growing population at a time when there is less land available for agriculture. And there are fewer farmers to do the work. Deere believes that as demand for food and efficient water use remains high, it is a long runway for growth†
Is DE Stock a sale?
My short answer is yes. But it’s up to you to decide if the risk is worth it for you. However, you should at least put DE stocks on your watchlist. I’ll just confirm what I wrote about Deere in February† The stock may need to fall further. This is not the time to get reckless.
Still, it appears that this is a case of a market revaluation, not a revaluation of the company and its stock. And if so, DE stock remains a solid choice for value-conscious long-term investors who can use this sell-off as an opportunity to buy stocks at a more attractive price.