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Deere Elevator Guide by Earnings. But the DE stock is wavering near key levels.




Deere (DE) guided higher for fiscal 2023 early Friday after easily topping second-quarter earnings estimates. DE stock jumped to a key level, then fell in choppy trading.




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Tractor manufacturer Deere is seen as a bellwether for the farm economy. It also makes heavy machinery for the construction and forestry markets.

“Expectations were clearly high today and Deere beat consensus despite some headwinds,” William Blair analysts said in a note to clients on Friday.

Baird analysts Lawrence De Maria and Ross Sparenblek rate stocks as outperformers. The Deere earnings call on Friday morning should provide more insight into the outlook and orders, they added, “given the recent negative performance in commodity prices.”

Deere revenue

Estimates: For the quarter ended April 30, Deere earnings were forecast to grow 26% to $8.58 per share, according to FactSet consensus estimates. Total revenue was seen up nearly 20% compared to a year earlier to $15.993 billion.

Results: Deere earnings rose 42% to $9.65 per share, although that’s down from 124% in the first quarter. Revenue rose 30% to $17.39 billion, beating expectations but still the second straight quarter of slowing sales growth.

Sales of production and precision agriculture rose by 53%. Sales of minor agriculture and turf increased by 16%. Construction and forestry increased by 23%.

“Deere continues to benefit from favorable market conditions and an improved operating environment,” CEO John May said in the Deere earnings release.

“While supply chain constraints continue to pose a challenge, we see further improvement,” May added.

Outlook: Deere now sees full-year revenue of $9.25 billion-$9.50 billion, compared with the previous target of $8.75 billion-$9.25 billion. Analysts had forecast net income of $9.06 billion, FactSet shows.

In stock

Shares of Deere rose 3.9% on the stock market today, clearing the 50-day moving average for the first time since early April. But Deere stock vacillated between gains and losses in mid-morning trading, falling back below its 50-day mark.

DE stock peaked last November and has been trending lower, with the 10-week moving average now below the 40-week line, the MarketSmith chart shows.

larva (CAT) and United Rentals (URI) is also trending lower and below key levels. CAT stock and URI stock rose 1.6% each Friday.

Farm prices, Machine sales

The World Bank estimates that agricultural commodity prices will fall 7% this year and likely fall again in 2024, the Texas Farm Bureau said on May 18, citing the bank’s latest outlook for commodity markets.

Prices for all types of farm equipment have risen in recent years for reasons very similar to those that drove car prices to record levels. As supply chain issues and demand begin to balance out, lower farm commodity prices could put further pressure on demand for farm equipment.

In April, construction giant Caterpillar also gave a weak outlook for equipment sales. United Rentals, which rents out scissor lifts and a range of heavy equipment, also delivered a mixed report.

Risk for Deere shares

Downside risks for Deere include “a decline in farm commodity prices, which could be pressured by either a stronger-than-expected crop or trade disputes with U.S. export partners,” Edward Jones analyst Matt Arnold said earlier in May.

Furthermore, “slowing economic growth could hurt Deere’s construction and forestry markets,” Arnold added.

Still, the analyst rates DE stock as a buy, based on valuation and long-term growth drivers.

So far this year, the farm stock is now down around 14%. The Deere stock yields a dividend of 1.3%.

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