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[Updated: 5/24/2021] Deere Inventory Update
The Deere & Company (NYSE: DE) share price has fallen 5% in the past five trading days. Much of that decline came before the company’s earnings announcement on Friday last week. The company released its Q2 tax results, which were way above Street estimates. Deere’s second-quarter revenue of $ 11.0 billion (up 34% year-on-year) was well above our forecast of $ 10.2 billion and consensus estimate of 10. $ 4 billion. This can be attributed to a high demand for both construction equipment and agricultural equipment. As for results, Deere’s EPS of $ 5.68 was also well above our consensus forecast of $ 4.25 and $ 4.52. The strong growth in net income (up 2.7 times year over year) can be attributed to both revenue growth and margin expansion, due to lower operating expenses.
Since DE stock fell 5% in just five days, Will it resume its bearish path in the coming weeks, or is a stock rally imminent? We believe the stock will rebound in the short term. The DE stock rose only 1% on Friday despite a strong second-quarter beat. This can be attributed to the fact that company management has said they expect supply chain issues for the remainder of the year. That said, the company has revised its forecast upwards, with net income now estimated at $ 5.3 billion to $ 5.7 billion, from $ 4.6 billion to $ 5.0 billion. Also, uSinging about the recent trend (5% drop in one week) and ten years of historical stock data, the Trefis AI engine finds that DE stock is likely to rise over the next month (twenty-one trading days). ).
According to the machine learning engine Trefis, which identifies trends in a company’s stock price using historical stock data, the average DE stock returns about 5.3% during the period of one month (twenty-one trading days) following experience a 5% fall in one week (five trading days), well above the 3.1% expected return of the S & P500 during the following month (twenty-one trading days). More importantly, there is a good 68% probability of a positive return over the next twenty-one trading days and 60% percent chance of a positive excess return.
But how would those numbers change if you wanted to hold DE shares for a shorter or longer period? You can test the answer and many other combinations on the Trefis Machine learning engine to test the chances of Deere & Company shares rising after a fall. You can test the chances of recovery over different time intervals of a quarter, a month, or even a single day!
Some fun scenarios, FAQs, and making sense of southern Kansas City stock movements:
Question 1: Is the average return on Deere & Company shares higher after a decline?
Reply: Consider two situations,
Case 1: Deere & Company shares fall -5% or more in a week
Case 2: Deere & Company shares rise 5% or more in a week
Is the average return on Deere & Company shares higher the next month after case 1 or 2?
Stock OF fares better after case 1, with an average return of 5.3% over the following month (21 trading days) in case 1 (where the stock has just suffered a loss of 5% over the previous week), against an average return of 1, 1% for case 2.
In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days in Case 1, and an average return of only 0.5% for Case 2, as detailed in our dashboard. which details the average return of the S&P 500 after a fall or rise.
Try the Trefis machine learning engine above to see for yourself how Deere and company stocks are likely to perform after a specific gain or loss over a period of time.
Question 2: Does patience pay?
Reply: If you buy and hold Deere & Company stock, it is expected that over time short-term fluctuations will cancel each other out, and the positive long-term trend will favor you – at least if the company is. otherwise strong.
Overall, according to data and calculations from Trefis’ machine learning engine, patience absolutely pays for most of the stock!
For the DE share, the returns over the next N days after a -5% change over the last 5 trading days are detailed in the table below, along with the returns of the S & P500:
Question 3: What about the average return after a rise if you wait a while?
Reply: The average return after a rise is naturally lower than after a fall, as detailed in the previous question. Interestingly, however, if a stock has won in the last few days, you’d better avoid short-term bets for most stocks – although DE stock seems to be an exception to this general observation.
It is powerful enough to test Deere & Company stock trend for yourself by changing the entries in the charts above.
[Updated: 5/18/2021] Deere Q2 revenue overview
Deere & Company (NYSE: DE) is due to release its second quarter tax results on Friday, May 21. We expect Deere to likely post revenue and profit slightly below consensus estimates. Deere is expected to benefit from improving demand for agriculture as well as construction equipment as economies gradually open up, further strengthening its overall revenue growth in the quarter. Our forecast indicates that Deere’s valuation is around $ 384 per share, which is the current market price. Now, based on our estimates, the company will likely report lower numbers than street expectations, which will likely lead to lower trading in DE shares after the Q1 announcement, and that could offer a good point. entry to long-term investors to buy the stock. Watch our interactive dashboard analysis at Deere & Company Pre-Earnings: What to expect in Q2? for more details.
(1) Expected revenues lower than the consensus estimate
Trefis estimates Deere’s total revenue in the second quarter of fiscal 2021 to be around $ 10.2 Bil, slightly below the consensus estimate of $ 10.4 billion. The company saw a strong rebound in demand for construction and farm equipment in the first quarter, with revenues up 19% to $ 9.1 billion. The company recently saw an increase in spending on farm equipment, mainly small tractors, which could continue to drive revenue growth in the second quarter. Deere, in its previous earnings conference call, presented revenue growth prospects of around 20% for the agriculture and turf segments as well as construction and forestry in 2021, primarily smallholder farming. , which ended the year at historically low levels for the inventory-to-sales ratio, and the company expects inventory levels to rebound in 2021. However, high inflation due to strong demand and Supply constraints after the pandemic could lead to increased spending by farmers, affecting overall spending on farm equipment, in the coming quarters. Our Deere revenue dashboard provides more details on the revenue breakdown by segment.
2) EPS likely to be lower than consensus estimates
Deere’s second quarter 2021 earnings per share (EPS) is expected to be $ 4.25 per Trefis analysis, 6% below the consensus estimate of $ 4.52. Deere’s first quarter net income of $ 1.2 billion reflects 137% growth over last year quarter profit of $ 517 million due to lower operating expenses . The first quarter also saw higher price realization for all segments, which helped overall margins, a trend that may continue into the second quarter as well. For the full year 2021, we forecast 70% year-on-year EPS growth to $ 14.75, supported by both revenue growth and margin expansion.
(3) Estimate of the share price in line with the current market price
According to our Deere & Company valuation, with an EPS estimate of around $ 14.75 and a P / E multiple of 26x in fiscal 2021, this translates to a price of $ 384, which is the current market price – $ 384.
Although the coronavirus outbreak has had a significant impact on Deere’s business in fiscal 2020 due to declining demand for its equipment, demand for both agriculture and construction equipment is growing. a rebound as the spread of the virus subsides, which will translate into Deere’s strong revenue and earnings growth in the near term. That said, the rebound already appears to be valued at the current share value of $ 384, implying that DE share is fully valued at current levels.
Note: P / E multiples are based on the stock price at the end of the year and the reported (or expected) adjusted profit for the full year.
See everything Trefis price estimates and Download Trefis data here
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