Deere & Company (NYSE: DE)
Friday was not only a really rough day for Deere (DE) but also for the entire market. The sell off from the last couple of days intensified into Friday as volume increased on what looked like a lot of panic selling on worries over a global growth slowdown. The DOW finished down 3% or 531 points for the day and just over 1,000 points off on the week. What a move!
Unfortunately for DE, they reported subpar earnings on Friday morning and got punished badly for it. Net income came in at $511.6 million or $1.53 per share compared to $850.7 million or $2.33 per share for the same period last year. That is almost a 40% decrease and what’s even more troubling is demand for agricultural products looks grim. DE is looking at a 25% decrease for the fiscal year in their agricultural and turf equipment.
“John Deere’s third-quarter results reflected the continuing impact of the downturn in the farm economy as well as lower demand for construction equipment,” said Samuel R. Allen, chairman and chief executive officer. “Nevertheless, all of Deere’s businesses remained solidly profitable, benefiting from the sound execution of our business plans and the success of our efforts to develop a more agile cost structure. As a result, the company continues to be well-positioned to provide customers with technologically advanced products and services, while funding its growth plans and returning cash to stockholders.” MarketWatch
Looking forward, DE is expecting a much slower year than last year as a result of the slower demand for their goods. They are still profitable across the board but earnings will remain soft for foreseeable future and you may want to hold off on buying shares until the market worries subside and they can prove that demand is picking up for their goods.
Up until this last earnings report, DE has had a decent year in terms of share price. Opening up 2015 at $88.47 per share, prices slowly trended their way up 11% to a high of $98.23 in June before cooling off and sliding back down in the low $90s range. Q3 earnings and an extreme market weakness sent the shares tumbling premarket and for most of the day on Friday as new lows were reached for the year at $81.89. DE is now in the red for the 2015, down just shy of 3%.
DE is now trading well below its 200d moving average and the next level of support looks to come into play at $80. This has provided strong support in the past and will be a big level to watch for over the next couple of weeks. Once a support level, the $85 level will now act as resistance as well as the 200d moving average sitting at $90.40. The Relative Strength Index is sitting below 22.98, a year low, indicating extreme weakness in the stock and possibly oversold conditions. However, keep in mind that this can stay in oversold territory for a while before price actually comes back up.
Deere & Co. manufactures and distributes a complete line of equipment used in agriculture, construction, forestry, and turf care. It also manufactures engines and other power train components. The company also provides credit and other services to customers around the world. The company operates its business through three segments: Agriculture & Turf, Construction & Forestry, and Financial Services. MarketWatch