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Deere & Co. stock rises with strong fourth quarter fiscal report

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Deere X9 and 8RX harvest

A Deere & Co. X9 and 8RX harvest a corn field. The X9 is one of the company's most technologically advanced combines, and is produced at Deere Harvester Works in East Moline.

Deere & Co. stocks are rising after the release of the Moline-based manufacturer’s fourth quarter fiscal report that exceeded Wall Street’s predictions.

As of Wednesday morning, stock of the construction, forestry, and agriculture equipment manufacturer was trading up to $17, plus-5%. The company said it had profit of $4.12 per share with a net income of $1.28 billion for the quarter coming off a five-week strike.

The average estimate of nine analysts surveyed by Zacks Investment Research was for earnings of $3.82 per share. The agricultural equipment manufacturer posted revenue of $11.33 billion in the period. Its adjusted revenue was $10.28 billion, which missed Street forecasts. Five analysts surveyed by Zacks expected $10.34 billion.

The rise in stock prices can be attributed to Deere exceeding Wall Street’s predicted revenue and share prices, according to Mark Grywacheski, financial analyst with Quad Cities Investment Group.

“We are seeing that strong performance being rewarded by Wall Street, stock is trading up about 5% on the day right now,” Grywacheski said. “It certainly doesn't appear that this strike had much of an impact on John Deere. Just look at the numbers, look at the data.”

Members of the International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America at Deere were on a five-week strike from Oct. 10 to Nov. 17. While on strike, the union members did not complete any work in the manufacturing plants while Deere’s salaried employees stepped in to continue production.

At a meeting for shareholders about Deere’s fourth quarter fiscal results, Cory Reed, president of worldwide agriculture & turf division. said Deere expects to see the 2022 fiscal year play out similarly to 2021 due to the temporary pause in production.

“We're very likely to see similar pressure in the first quarter as we recover from record low inventories, but also expected production ramps that help us maintain and even grow our position as we execute throughout the year,” Reed said.

In addition to a temporary pause in production, Deere also faced supply chain challenges throughout the 2021 fiscal year, according to the company. Grywacheski said these challenges were factored into Wall Street’s predictions.

“Deere was also trying to manage a lot more than just this one-month-long strike,” Grywacheski said. “It was also facing a very high level of inflation, a very severe labor shortage, and ongoing disruptions to both global and domestic supply chains.”

Last quarter, stock of the construction, forestry, and agriculture equipment manufacturer rose to $5.32 per share, resulting in $1.667 billion in net income, at the end of the quarter on Aug. 1, which was higher than the fourth quarter.

For the year, the company reported profit of $5.96 billion, or $18.99 per share. Revenue was reported as $39.74 billion. Looking towards fiscal year 2022, Deere expects another record-breaking year of profits. But the first quarter may start off slower, according to the company and Grywacheski, due to the strike.

“We expect the top line for the class to be pretty similar to the first quarter of 2021,” said Brent Norwood, manager of investor relations at John Deere. “Missing a few weeks plus a production will neutralize some of the benefits that [were] mentioned in terms of ramping up to higher line rates in December and January.”

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