Analyst Note| Dawit Woldemariam |
Deere’s fiscal third-quarter results showed farmers continued to refresh their equipment. Sales in equipment operations rose 32% year on year, largely due to strong volume and price realization. This led management to raise its 2021 outlook--net income is now expected to come in between $5.7 billion and $5.9 billion (up from $5.3 billion-$5.7 billion). As a result, we raised our fair value estimate to $256 from $248. We now forecast sales in 2021 to grow 27% year over year (over 100 basis points higher than our previous estimate). The increase in our sales growth assumption is mainly due to our stronger outlook for the small agriculture and construction segments.