Editor’s Note (2/19/2021): In a previous version of this article, Equipment Operations net sales were incorrectly reported as net sales and net sales. This has since been corrected.
Deere & Company (DE) is trading 6% higher after blowing away earnings estimates for the first quarter of 2021, earning $ 3.87 per share compared to expectations of $ 2.17. Revenue grew 19.4% year over year to $ 9.11 billion, well above the estimate of $ 7.12 billion. The strong positive reaction after the news has defied the odds as the previous return of 15% is on top of the extraordinary return of 55% in 2020. The stock is now just a stone’s throw away from the all-time high of $ 321.67 posted on Tuesday.
The central theses
- Deere significantly exceeded the top and bottom line estimates for the first quarter of 2021.
- The company is moving towards fully autonomous machines.
- The stock has posted historic gains since March 2020.
- Price action is challenging this week’s all time high.
The agricultural giant is benefiting from higher agricultural prices. The company is also moving towards fully autonomous tractors, combines, cotton pickers, sugar cane harvesters and loaders, as well as soil preparers, seed drills and plant care equipment, improving margins in a multi-billion dollar industry with few competitors. Investor apathy has disappeared since the stock hit a three-year low in March 2020, underpinning an uptrend that has made its most productive gains this century.
Wall Street consensus on Deere has deteriorated over the past year due to oversized price gains. The “Moderate Buy” rating is based on 12 “Buy” and 4 “Hold” recommendations. An analyst now recommends that shareholders close positions and step on the sidelines. Price targets Currently, they range from a low of $ 220 to a street high of $ 400, while the stock is set to open the session about $ 8 above the median of $ 310 on Friday.
Tip
Profit margin is one of the most used Profitability metrics to assess the extent to which a company or business activity makes money. It indicates what percentage of sales have been converted into profit. Simply put, the percentage is how many cents in profit the company made for every dollar sold.
Deere Long-Term Chart (1993-2021)
TradingView.com
Deere generated strong returns in the 1990s fueled by the collapse of the communist bloc. It topped a split-adjusted $ 32.06 in 1998, its highest high for the next six years. A breakout in 2004 found little buying interest and resulted in a tight range-bound promotion in addition to the new ones supportbefore a strong momentum wave that ended in 2008 in the mid-1990s. The ensuing decline dropped more than 70% of the stock’s value to the six-year low in March 2009.
A V-shaped recovery wave hit the previous high in 2011, yielding four failed breakout Attempts in the fourth quarter of 2016. It had better luck than that after the presidential election and went into healthy progress that topped at $ 175.26 Trade war with China was the focus. An outbreak attempt in 2019 failed after the coronavirus outbreak in Wuhan, causing a sharp drop to its lowest low since February 2017.
A strong recovery wave peaked in 2019 in August 2020 and resulted in an immediate breakout that caused a vertical advance more typical of an electric vehicle manufacturer than an engineering company. The price movement has not produced any significant withdrawal or consolidation pattern since July and has developed extremely strongly overbought technical metrics that at least so far have had no impact on the momentum price movement.
You can see this on a monthly basis stochastic oscillatorFlatline action since then has been common in a very strong uptrend, but it will take little selling pressure to trigger an intermediate product at this point correction that drops the stock into the 50 weeks exponential moving average (EMA) at $ 250 as the first downside target. Whatever happens, the current price level doesn’t seem like a good place to jump on board.
Tip
Overbought is a term used when it is believed that a security is trading at a level above its intrinsic or fair value. Overbought generally describes the recent or short-term movement in the price of a security and reflects the expectation that the market will correct the price in the near future. This belief is often the result of technical analysis the price development of the security, however Basics can also be used.
The bottom line
Deere is testing this week’s all-time high after blowing away the top and bottom line estimates for the first quarter of 2021.
Disclosure: The author held no positions in any of the above securities at the time of publication.
