Deere Is Down By 7%, Here Is Why

Key Insights

• Deere reported fiscal Q2 results, easily beating analyst expectations. 
• However, it was not sufficient enough to push the stock higher as traders’ expectations were elevated. 
• The stock trades at 13 forward P/E and may attract speculative traders who are willing to bet on the rebound after an almost 25% pullback from all-time highs.

Deere Stock Declines As Guidance Fails To Meet Traders’ Expectations

Shares of Deere gained strong downside momentum after the company released its fiscal second quarter report. Deere reported revenue of $13.37 billion and GAAP earnings of $6.81 per share, beating analyst estimates on both earnings and revenue. The company noted that demand remained strong despite supply chain issues.

In fiscal 2022, Deere expects to report net income of $7 billion – $7.4 billion and net operating cash flow of $5.6 billion – $6 billion. The market was more optimistic, so the stock found itself under significant pressure.

It should be noted that Deere shares were up by 6% year-to-date ahead of the release of the earnings report, so the stock outperformed S&P 500 by a wide margin. In this light, it is not surprising that traders’ expectations were elevated, and a decent report caused a sell-off.

What’s Next For Deere Stock?

Currently, analysts expect that Deere will report earnings of $22.7 per share in the current fiscal year and earnings of $26.22 per share in the next fiscal year, so the stock is trading at 13 forward P/E.

Analyst estimates have been mostly moving higher in recent months, which provided additional support to the stock.

Deere made an attempt to settle above the $445 level back in April, but the broad sell-off in the markets put pressure on the stock and pushed it to the $340 level after the release of the fiscal Q2 report.

The company’s valuation looks attractive, so the stock may get some support from speculative traders after an almost 25% pullback from all-time highs.

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