Deere & Company (DE) just wrapped up a record year as global farming conditions remained favorable. But shares of this Zacks #2 Rank (buy) stock have sunk in recent months. Deere is now a value stock, with a forward P/E of just 10.
Founded in 1837, Deere manufactures agriculture and construction equipment in 30 countries worldwide.
Sales Jumped 20% in Q4
On Nov 23, Deere reported its fiscal 2011 fourth quarter results and, once again, easily beat the Zacks Consensus Estimate. Earnings per share were $1.62 compared to the consensus of $1.44. It made just $1.07 in the year ago quarter.
It continued the impressive earnings surprise streak, which now extends for 11 quarters.
Sales climbed 20% to $8.6 billion in the quarter. It was a strong end to a year which saw net sales jump 23% to $32 billion.
Equipment sales were higher in all of its geographic segments in the quarter. The U.S. and Canada saw 14% gains while the areas outside of the U.S. and Canada soared 31%. Favorable currency-translation accounted for 4% in the quarter.
It wasn’t just agriculture which was hot. While Agriculture & Turf sales rose 18%, due to higher shipment volumes, Construction & Forestry sales jumped 34%. Agriculture is the larger division, however.
Outlook for Fiscal 2012
American farmers had record income in 2011 which boosted demand. In 2012, overall conditions are expected to remain positive and demand is forecast to remain strong, especially for high-horsepower equipment.
Farm-machinery sales in the U.S. and Canada are projected to rise 5% to 10% in 2012.
Deere is projecting its equipment sales to be up 16% to 18% for the first quarter compared with a year ago. It also sees sales up 15% for the full year.
Zacks Consensus Estimates Rise
Given yet another earnings beat and the optimistic forecast, it’s not surprising that the analysts are bullish about Fiscal 2012.
The 2012 Zacks Consensus Estimate has jumped to $7.74 from $7.21 in the last month. That is earnings growth of 16.7% over fiscal 2011.
Shares Have Pulled Back
Deere shares staged a huge rally out of the Great Recession and hit multi-year highs in early 2011. But worries over the global economy have hit the stock in recent months.
This has created an opportunity for value investors to get into the stock at a much lower valuation.
The company’s P/E of 10 is well under the S&P 500 average of 12.8 and is easily within the range of most value stocks.
Its price-to-book ratio of 4.8 is a little higher than I would like but Deere’s P/S ratio of 1.0 is an indicator of value.
Additionally, the company has a stellar 1-year return on equity of 39.5%.
As long as farming stays hot, Deere is perfectly positioned to cash in. Not too shabby for a 174-year old company.
This Week’s Value Zacks Rank Buy Stocks
Will it be happy holidays for the retailers or will Santa bring them coal? The Finish Line, Inc. (FINL) has been on a roll since the Great Recession. This Zacks #1 Rank (strong buy) is trading at just 12.2x forward estimates. Read the full article.
Genesco Inc. (GCO), a specialty shoe and hat retailer, is in the sweet spot for retailing. This Zacks #1 Rank (strong buy) is expected to see double digit earnings growth this year. Shares recently soared to a new multi-year high. But surprisingly, GCO is also a value stock, with a forward P/E of 14.7. Read the full article.
Goodyear Tire & Rubber Company (GT) recently posted its best quarterly sales in the company’s 113-year history. This Zacks #1 Rank (strong buy) is expected to post triple digit earnings growth in 2011. It’s also dirt cheap, with a forward P/E of just 6.4. Read the full article.
Is Signet Jewelers Limited (SIG) a diamond in the rough? The jewelry giant has surprised on the Zacks Consensus Estimate 11 quarters in a row as jewelry demand has rebounded since the Great Recession. This Zacks #1 Rank (strong buy) is also a value stock, with a forward P/E of just 11.7, well under its peers at 18x. Read the full article.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her on twitter at traceyryniec.
