The biggest segment, production & precision agriculture (the big 9R tractors, and whatnot) saw 9% sales growth. The same goes for GAAP EPS, which came in at $2.92. Even better, it was $250 million than analysts expected. That's up 6.0% compared to the prior-year quarter. In 1Q22, Deere generated total revenue worth $8.53 billion. With that said, let's dive into the numbers. Meaning, a lot has been priced in already. If the stock price remains at current levels, the year-on-year performance will quickly drop to 1% over the next 2-3 months. So, investors have started to price in slower growth as Deere's stock price is up just 8% over the past 12 months. This means machinery companies may suffer - after all, Deere does have construction exposure and risks are that agriculture suffers, too. What this means is that economic growth, in general, will almost certainly show significant weakness in the months ahead. It's fairly comparable to the well-known ISM Manufacturing Index. I use the Empire State index a lot because it does tell us what we can expect in terms of economic growth. What you're looking at above is a comparison between the Empire State Manufacturing Survey - conducted by the New York Fed - and the year-on-year performance of the Deere stock price. The stock is up roughly 9% year-to-date and roughly the same since my bullish article in December. In the past six months, Deere's stock price has risen 0.3% excluding dividends.
It does in terms of financials as I will show you in this article, but it doesn't generate capital gains like its agriculture peers in other sub-industries like fertilizer and herbicide producers. This technically means that the company should benefit from the ongoing bull market in agriculture. Roughly 71% of the company's 1Q22 sales came from agriculture - both small and large vehicles and equipment. It has everything to do with its inability to make new highs. Of course, Deere is a machinery company, everyone knows that. Now, without further ado, let's look at the numbers. It's bad news for people looking to make a quick buck, but good news for investors who want to initiate a position or add to existing positions. It seems the stock is consolidating before continuing its uptrend later this year. Moreover, the stock price uptrend that started going into this year is slowing as economic growth has peaked. Yet, the company suffered from high input costs and inflation. Hence, the company did what it does best: it beat earnings and raised guidance - again. In today's article, I will discuss the company's just-released 1Q22 earnings, which couldn't come at a better time as I'm currently working my way through the agriculture industry as followers will have noticed.
#Tractor bumpy road free
In December, I wrote my most recent article covering the company's ability to generate strong free cash flow, used to aggressively hike dividends and boost buybacks. It's one of my largest long-term dividend growth investments, and it's the cornerstone of my agriculture bull case, which I started working on in early 2020. I'm bullish on Deere & Company ( NYSE: DE). Nicholas Smith/iStock Editorial via Getty Images Introduction