Deere & Company stock plunges despite upbeat earnings

6:06 PM May 20, 2022

Deere & Company (DE.US) stock tumbles more than 12.0% during today's session after the agricultural machinery and heavy equipment maker reported mixed quarterly results. Company earned $6.81 per share, up 19.9% from the same period last year and above analysts’ estimates of $6.71 per share as higher crop prices have a positive impact on demand. Company lifted its annual guidance despite revenue figures that came in below analysts’ estimates.

  • "Deere's second-quarter performance reflected a continuation of strong demand even as we face supply-chain pressures affecting production levels and delivery schedules," said CEO John May.

  • Agricultural division jumped 13% YoY, however  operating profit margins in the segment fell almost 2.0% to about 20%. 

  • Overall profit margins of equipment segments increased around 0.4%YoY.

  • For the full fiscal year, the company expects net income in the region from $7 billion to $7.4 billion, which is significantly higher compared to previous projections of $6.7 billion to $7.1 billion, with solid demand for farm and construction equipment, increased infrastructure spending and favorable crop prices. 

Given the optimistic financial outlook, rising food prices and the prospect of food shortages in many places around the world, it appears that the investors' response may be somewhat exaggerated, and today's declines are largely driven by the overall negative sentiment prevailing in the markets.

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Deere & Company (DE.US) stock fell nearly 30.0% from its all-time high at 446.45 and is currently testing major support at $315.20 which coincides with 38.25 Fibonacci retracement of the upward wave launched in March 2020. Should break lower occur, next target for sellers is located around $280 level, which is marked with previous price reactions. Source: xStation5

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