What happened

Late last month, heavy equipment manufacturer Deere & Co. (DE -0.07%) reported better-than-expected fiscal fourth-quarter results thanks to strong demand from agricultural customers. Investors cheered both its results and management's forecast for more good times to come, sending shares of Deere up 11.4% in November, according to data provided by S&P Global Market Intelligence.

So what

Although many sectors of the economy have sputtered in 2022, agriculture has held up relatively well. Higher crop prices, driven in part by disruptions in Ukraine -- normally a major food exporter -- have provided farmers with funds to invest in new tractors and other heavy machinery. Meanwhile, the passage of President Biden's massive infrastructure bill has led to increased spending on new construction equipment.

Deere has been a primary beneficiary of both trends, and as a result, it outperformed expectations in its fiscal Q4, which ended Oct. 30. The company earned $7.44 per share in the quarter on revenue of $15.54 billion, easily besting analysts' consensus expectations for $7.11 per share in earnings on $13.39 billion in sales.

The strength was widespread. Net sales in its agriculture, turf, and construction and forestry divisions rose by 59%, 26%, and 20%, respectively.

Now what

Deere expects the good times to continue in its fiscal 2023: Management's guidance is for net income of between $8 billion and $8.5 billion, and net operating cash flow of between $9 billion and $9.5 billion. The company foresees its heavy agriculture sales rising 15% to 20% for the year, and its segment operating margin topping 20%.

In the fiscal Q4 earnings release, CEO John C. May said he expects "positive farm fundamentals and fleet dynamics as well as an increased investment in infrastructure" to fuel growth in the new year, supported by the company's work to streamline and cut costs.

Deere can be a cyclical business because the equipment it sells represents a major investment for buyers. When times are tough on the farm, it can be harder to justify (or manage) the expense of a new combine, for example. But all the trends appear to be moving in Deere's favor right now, and investors are excited about what lies ahead.