Here’s Why Deere Stock Is Likely To See Higher Levels After A 5% Fall In A Week

[Updated: Sep 23, 2021] Deere Stock Decline

The stock price of Deere (NYSE:DE) has seen a decline of 5% over the last five trading days. The recent decline can be attributed to rising concerns of slowing growth in China if Evergrande – China’s largest real-estate firm with over $300 billion in debt – were to default. A default could impact Chinese banks and credit markets, potentially spilling over to other areas of the Chinese economy. This also impacts some of the industrial companies, such as Deere and Caterpillar, which generates some of their revenues from China. Although the exposure for Deere is far lower than Caterpillar, with just a little over 10% of its sales coming from Asia, Africa, Australia, New Zealand, and Middle East. Nevertheless, the markets were not kind to DE stock over the last week or so. This can be attributed to the fears that if Evergrande were to collapse, it’s impact may not be limited to China but global GDP growth, and that will not bode well for industrial companies at large. But will DE stock continue its downward trajectory over the coming weeks, or is a rise in the stock imminent?

According to the Trefis Machine Learning Engine, which identifies trends in the company’s stock price using ten years of historical data, returns for DE stock average around 5% in the next one-month (twenty-one trading days) period after experiencing a 5.3% fall over the previous week (five trading days), implying that the stock will likely rebound in the near term. But how would the returns fare if you are interested in holding DE stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Deere stock price forecast. You can test the chance of recovery over different time intervals of a quarter, month, or even just 1 day!

While DE stock may rise around 5% over the next month, based on its historical performance, if you are considering DE stock as an investment over a larger time frame, you can explore our forecast for Deere’s valuation of $434 per share, based on our adjusted EPS forecast of $18.86 and a P/E multiple of 23x for fiscal 2021.

MACHINE LEARNING ENGINE – try it yourself:

If DE stock moved by -5% over five trading days, then over the next twenty-one trading days DE stock moves an average of 5%, with a reasonable 66% probability of a positive return over this period, based on the stock’s historical performance.

Some Fun Scenarios, FAQs & Making Sense of Deere & company Stock Movements:

Question 1: Is the price forecast for Deere & company stock higher after a drop?

Answer: Consider two situations,

Case 1: Deere & company stock drops by -5% or more in a week

Case 2: Deere & company stock rises by 5% or more in a week

Is the price forecast for Deere & company stock higher over the subsequent month after Case 1 or Case 2?

DE stock fares better after Case 1, with an expected return of 5% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an expected return of 1.5% for Case 2. This implies a price forecast of $358 in Case 1 and a figure of $346 in Case 2 using DE market price of $340.84 on 9/23/2021.

In comparison, the S&P 500 has an expected return of 3.1% over the next 21 trading days under Case 1, and an expected return of just 0.5% for Case 2 as detailed in our dashboard that details the expected return for the S&P 500 after a rise or drop.

Try the Trefis machine learning engine above to see for yourself how the forecast for Deere & company stock is likely to changes after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer: If you buy and hold Deere & company stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For DE stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

You can try the engine to see what this table looks like for Deere & company after a larger loss over the last week, month, or quarter.

Question 3: What about the stock price forecast after a rise if you wait for a while?

Answer: The expected return after a rise is understandably lower than after a drop as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks – although DE stock appears to be an exception to this general observation.

It’s pretty powerful to test the trend for yourself for Deere & company stock by changing the inputs in the charts above.

[Updated: Aug 24, 2021] Deere Stock Update

Deere & Company (NYSE:DE) recently reported its fiscal Q3 2021 results, which were comfortably above our estimates. The company reported revenues of $10.4 billion, compared to our estimate of $9.9 billion and $10.3 billion consensus estimate. Similarly, the EPS of $5.32 was well above the $4.45 per Trefis and $4.57 consensus estimates. The strong performance was led by a continued uptick in demand for both construction and agricultural equipment. Deere saw higher volume as well as better price realization for both the segments in Q3.

Looking forward, the company has warned about rising raw-material costs and increased supply-chain challenges, that may impact its growth in Q4 and into the next fiscal year. As such, despite a solid Q3, DE stock declined over 3% following the earnings release on Aug 20.

We have updated our model following the Q3 release. We now forecast sales to be $39.9 billion for the full-fiscal 2021, up 25% y-o-y, compared to our previous estimate of around $39.7 billion. Looking at the bottom line, we now estimate adjusted EPS to be $18.86, compared to our earlier estimate of $17.60. This can largely be attributed to a strong earnings beat in Q3. Given the changes to our revenues and earnings forecast, we have revised our Deere Valuation at $434 per share, based on $18.86 expected EPS and 23x P/E multiple for fiscal 2021. This reflects a 20% premium to the current market price of $363, implying that DE stock is undervalued currently, in our view.

[Updated: Aug 18, 2021] Deere Fiscal Q3 2021 Earnings Preview 

Deere & Company (NYSE:DE) is scheduled to report its fiscal third-quarter results on Friday, August 20. We expect Deere to likely post revenues and earnings below the consensus estimates. While Deere is expected to benefit from improved demand for agriculture as well as construction equipment, with the gradual opening up of economies, rising raw-material costs may put some pressure on margins. That said, our forecast indicates that Deere’s valuation is around $425 per share, which is more than 12% above the current market price of $376. Look at our interactive dashboard analysis on Deere & Company Pre-Earnings: What To Expect in Q3? for more details.

(1) Revenues expected to be below the consensus estimate

Trefis estimates Deere’s Q3 fiscal 2021 total revenues to be around $9.9 billion, 4% below the consensus estimate of $10.3 billion. The company saw a strong rebound in the demand for construction as well as agriculture equipment over the last couple of quarters. In Q2 fiscal 2021, revenue rose a solid 30% to $12.1 billion, as the company continued to see an increase in spending on agricultural equipment. The company also expects a rebound in inventory levels, which should aid the overall sales growth in Q3. Our dashboard on Deere Revenues provides more details on segment-wise revenue breakup.

2) EPS likely to be below the consensus estimates

Deere’s Q3 fiscal 2021 earnings per share (EPS) is expected to be $4.45 per Trefis analysis, 3% below the consensus estimate of $4.57. Deere’s net income of $1.8 billion in Q2, reflected a large 169% growth from its $666 million profit in the prior year quarter, led by higher sales and a decline in operating expenses. While Q2 saw a higher price realization, aiding the overall margins, Q3 may see some pressure on margins, primarily due to a rise in raw-material costs. Looking at the full year 2021, we expect EPS to more than double to $17.60, aided by both revenue growth as well as margin expansion.

(3) Stock price estimate 13% above the current market price

Going by our Deere & Company Valuation, with an EPS estimate of around $17.60 and P/E multiple of 24x in 2021 (vs. 26x in 2021), this translates into a price of $425, which is 13% above the current market price – $376. Although the coronavirus outbreak has had a sizable impact on Deere’s business in fiscal 2020 due to lower demand for its equipment, the demand for both agriculture as well as construction equipment has seen a strong rebound so far this year, a trend expected to continue in the near term.

Note: P/E Multiples are based on Share Price at the end of the year, and reported (or expected) Adjusted Earnings for the full year