Sandy Pomeroy is bullish on Deere after a strong Q3

Deere & Company (NYSE:DE) is down 4.0% this morning even though it reported solid results for its third financial quarter.

Deere raised its guidance as well

The price action is particularly interesting considering the agricultural equipment manufacturer raised its guidance for the full year as well.

Deere now forecasts its net income to fall between $9.75 billion and $10 billion in fiscal 2023, as per the press release. Its previous guidance was for up to $9.50 billion.

Note that the New York listed firm currently pays a dividend yield of 1.24%. According to Sandy Pomeroy of Neuberger Berman:

Dividend stocks grow their dividends. If you had inflation into the mix, you’re going to be better off because many of these companies have pricing power. So, you become ahead of the game.

Why is Deere stock trading down today?

Deere stock is in the red today perhaps because investors are concerned if the ongoing increase in demand can sustain moving forward.

Note that crop prices are now moderating in the United States. What it means for farmers is less flexibility in terms of buying new gear.

Net farm income is expected to decline by 20% this year to $151 billion, as per the U.S. Department of Agriculture. Still, the Senior Portfolio Manager of Neuberger Berman said on Friday:

You have may have a reversal in dividend stocks based just on the fact that they’re as cheap as the tech boom of 1990s. They went on to be outperformers for the next 10 years. That could happen again.

Deere Q3 earnings snapshot

• Earned $2.98 billion versus the year-ago $1.88 billion
• Per-share earnings also went up from $6.16 to $10.20
• Revenue jumped 12% year-on-year to $15.80 billion
• Consensus was $8.22 a share on $14.14 billion revenue

Deere also said that it concluded the recent quarter with a strong order book. On CNBC’s “Squawk on the Street”, Neuberger’s Pomeroy noted:

We have infrastructure boom going on, investment because of IRA, we have rickety infrastructure all over this country that needs to be rebuilt – so companies like Deere will be beneficiaries.

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