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Deere (NYSE:DE) moved little on Tuesday, ahead of its fourth-quarter earnings scheduled on November 22nd before the market opens.
The agricultural and farming machinery manufacturer is expected to post an EPS of $7.46 and a revenue of $13.66B (-3.1% Y/Y).
The Illinois-based Deere was among large-cap industrials that registered a drop in November. In September, the company was downgraded to Hold from Buy by Canaccord Genuity, who said that Deere faces slowing growth in agriculture and dealer inventories of used machinery increase.
Before that, brokerage Evercore ISI not only downgraded Deere but peer CNH Industrial (CNHI) to In-Line from Outperform and commented that the makers of farming equipment are slowing production at factories in Europe and Brazil amid weaker demand.
Over the last three months, EPS estimates have seen nine upward revisions and nine downward. Revenue estimates have seen six upward revisions and five downward.
“Investors are concerned about Deere’s cyclicality and its history of downturns, but the stock has always recovered and seems to always trend upward,” said SA Contributor Luca Socci.
The upcoming earnings report may show declining order books and softening demand, but North America’s demand for equipment remains strong, Socci added.
In its third-quarter results, the company delivered an earnings beat and also raised its full-year guidance on easing supply chain issues, but its stock slipped up to 5% as investors remained concerned over lower sales volume going ahead.
Historical data shows that Deere stock has regularly experienced price declines of -50% or more during recessionary periods. Investing in Deere stock after a -50% decline and selling after the price recovers to its old highs has historically produced positive returns, said SA Contributor Cory Cramer.
Since the start of the year, Deere has fallen 10.34%. The stock is rated a Strong Buy with a score of 4.67 out of 5 by Seeking Alpha’s Quant ratings.
