Analyst Pumps The Brakes On Deere Stock Ahead Of Earnings

Deere reports earnings before the open on Friday

Managing Editor
Aug 13, 2018 at 10:14 AM
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Deere & Company (NYSE:DE) will report fiscal third-quarter earnings before the open on Friday, Aug. 17. The stock has a history of positive earnings reactions, closing higher in the session subsequent to the tractor maker's results in seven of the past eight quarters. However, leading up to this week's event, J. P. Morgan Securities issued a price-target cut to $145 from $154, sending DE stock down 0.5% to trade at $136.35 this morning.

Deere stock is heading towards its fourth straight loss, and has a 13% deficit for 2018. The equity's year has been defined by choppy price-action, and the most recent breakout attempt was quickly rejected by the 100-day moving average. 

Many analysts still remain optimistic, though. Exactly 75% of the brokerages covering DE rate it a "buy" or "strong buy," with not a single sell on the books. Furthermore, its consensus 12-month price target of $180.76 is a 32% premium to its current perch. More bear notes on the horizon could usher the security lower.

In the options pits, traders have preferred calls. This is indicated by DE's 50-day call/put volume ratio of 1.53 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks in the 90th annual percentile. The elevated percentile rank indicates the rate of call buying has been unusual. Continued struggles from Deere stock could lead to an unwinding of these bullish bets.

Echoing this, the Schaeffer's put/call open interest ratio (SOIR) comes in at 0.56 and ranks in the 15th percentile of its annual range. This indicates near-term call open interest outweighs put open interest by a wider-than-usual margin at the moment. 

Traders, whether bullish or bearish, may want to consider Deere options, since it's been a good target for premium buyers during the past year. That's according to its Schaeffer's Volatility Scorecard (SVS) of 89 out of 100, which shows it's tended to make much bigger-than-expected moves on the charts compared to what the options market was expecting.

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