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Deere (DE) Dips More Than Broader Markets: What You Should Know

Zacks Equity Research
Alcoa (AA) delivered earnings and revenue surprises of 97.06% and -2.92%, respectively, for the quarter ended June 2019. Do the numbers hold clues to what lies ahead for the stock?

Deere (DE) closed at $161.80 in the latest trading session, marking a -1.15% move from the prior day. This change lagged the S&P 500's daily loss of 0.94%. At the same time, the Dow lost 0.87%, and the tech-heavy Nasdaq lost 1.18%.

Heading into today, shares of the agricultural equipment manufacturer had gained 6.06% over the past month, lagging the Industrial Products sector's gain of 9.85% and the S&P 500's gain of 8.01% in that time.

Wall Street will be looking for positivity from DE as it approaches its next earnings report date. This is expected to be February 15, 2019. The company is expected to report EPS of $1.80, up 37.4% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $6.89 billion, up 15.38% from the year-ago period.

DE's full-year Zacks Consensus Estimates are calling for earnings of $11.44 per share and revenue of $35.95 billion. These results would represent year-over-year changes of +21.83% and +7.79%, respectively.

Any recent changes to analyst estimates for DE should also be noted by investors. These revisions help to show the ever-changing nature of near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has moved 0.03% higher. DE is currently a Zacks Rank #3 (Hold).

Looking at its valuation, DE is holding a Forward P/E ratio of 14.31. For comparison, its industry has an average Forward P/E of 13.96, which means DE is trading at a premium to the group.

Meanwhile, DE's PEG ratio is currently 1.6. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. Manufacturing - Farm Equipment stocks are, on average, holding a PEG ratio of 1.68 based on yesterday's closing prices.

The Manufacturing - Farm Equipment industry is part of the Industrial Products sector. This group has a Zacks Industry Rank of 232, putting it in the bottom 10% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To follow DE in the coming trading sessions, be sure to utilize Zacks.com.

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