DE Drives Higher on Q2 Beat, Despite Dismal Forecast

Deere predicted a 30% to 40% drop in global sales in 2020

Deputy Editor
May 22, 2020 at 9:49 AM
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The shares of tractor name Deere & Company (NYSE:DE) are eyeing their third consecutive win today, up 3.1% at $147.20 in pre-market trading after the firm's fiscal second-quarter earnings and revenue beat analysts' estimates, even on a 41% drop in quarterly profits. The company blamed a sharp decline in demand as farmers and ranchers struggle to sell their goods amid coronavirus-led restrictions, and said it expects a 30% to 40% drop in global equipment sales for the year. 

Today's move has DE set to topple its 80-day moving average for the first time since its late-February peak, after taking out overhead pressure at its 60-day earlier this week. Looking back, DE suffered a steep selloff at the start of the month, but support near the $120 level prevented the stock from careening back towards its mid-March, three-year lows. Deere stock just reclaimed its year-over-year breakeven, though it's still off roughly 17% in 2020. 

Analysts are still somewhat cautious on Deere. Of the 16 in coverage, seven call it a "buy" or better, while nine say "hold." Meanwhile, the consensus 12-month price target of $160.53 is an 8% premium to current levels. 

Options traders have been a bit more optimistic. At the the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 1.38 calls were picked up for every put in the last 10 days. This ratio sits in the lofty 93rd percentile of its annual range, suggesting a much healthier-than usual appetite for long calls of late. 


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