Case Study Is Selling Deere & Company
Is Selling Deere & Company (DE) A Wise Strategy?
Deere & Company (NYSE:DE) shares have been rising since the start of this year despite falling sales and earnings. DE’s share price spiked almost 21% over the last eleven months, supported by improvement in commodity prices. Deere’s stock price also experienced a solid support from its third quarter results and Donald Trump’s win.
Trump’s strategy of making changes in energy, climate, and tax policies could benefit Deere’s future fundamentals. In addition, traders are excited over the Trump’s aggressive infrastructure and transportation policies.
However, some bearish analyst sees the recent rally in DE’s stock price as a strong selling opportunity. Following a rally of more than 11% in the
last two months alone, Deere’s stock currently stands around its highest level in the last 52-weeks. Considering a double-digit decline in sales for the full year, Deere & Company’s stock offers a perfect selling opportunity for short-term value investors.
However, DE’s stock also has the potential to offer solid returns for the long-term investors. Its dividends are safe despite struggling top-line performances. In the latest quarter, the company’s sales fell almost 11% to $6.7 billion, compared with the same period last year.
However, due to cost cuttings and operational efficiencies, Deere was able to lower the impact on earnings performance. The company generated a positive growth in earnings for the third quarter, which led it to raise the full-year earnings outlook to $1.35 billion from the earlier estimate of 1.20 billion.
Its CEO said, "All of Deere's businesses remained profitable with the Agriculture & Turf division reporting higher operating profit than last year. As in past quarters, our results benefited from the sound execution of our operating plans, the impact of a broad product portfolio, and our success keeping a tight rein on costs and assets."
Furthermore, Deere & Company is operating in a less capital intensive industry, allowing it to generate strong free cash flows. Its disciplined capital allocation strategy due to an unstable environment has also been enhancing its cash generation. In the last nine months, DE generated operating cash flow of $1.3 billion, compared with capital investments of only $360 million. Consequently, the company is left with massive free cash flows to support dividends and shares buybacks.
Deere & Company (NYSE:DE) shares have been rising since the start of this year despite falling sales and earnings. DE’s share price spiked almost 21% over the last eleven months, supported by improvement in commodity prices. Deere’s stock price also experienced a solid support from its third quarter results and Donald Trump’s win.
Trump’s strategy of making changes in energy, climate, and tax policies could benefit Deere’s future fundamentals. In addition, traders are excited over the Trump’s aggressive infrastructure and transportation policies.
However, some bearish analyst sees the recent rally in DE’s stock price as a strong selling opportunity. Following a rally of more than 11% in the
last two months alone, Deere’s stock currently stands around its highest level in the last 52-weeks. Considering a double-digit decline in sales for the full year, Deere & Company’s stock offers a perfect selling opportunity for short-term value investors.
However, DE’s stock also has the potential to offer solid returns for the long-term investors. Its dividends are safe despite struggling top-line performances. In the latest quarter, the company’s sales fell almost 11% to $6.7 billion, compared with the same period last year.
However, due to cost cuttings and operational efficiencies, Deere was able to lower the impact on earnings performance. The company generated a positive growth in earnings for the third quarter, which led it to raise the full-year earnings outlook to $1.35 billion from the earlier estimate of 1.20 billion.
Its CEO said, "All of Deere's businesses remained profitable with the Agriculture & Turf division reporting higher operating profit than last year. As in past quarters, our results benefited from the sound execution of our operating plans, the impact of a broad product portfolio, and our success keeping a tight rein on costs and assets."
Furthermore, Deere & Company is operating in a less capital intensive industry, allowing it to generate strong free cash flows. Its disciplined capital allocation strategy due to an unstable environment has also been enhancing its cash generation. In the last nine months, DE generated operating cash flow of $1.3 billion, compared with capital investments of only $360 million. Consequently, the company is left with massive free cash flows to support dividends and shares buybacks.