Deere’s earnings report is due before the bell close today. The business invested heavily in robots and technology, and investors are eager to see if this paid off. Deere also acquired an autonomous tractor maker, Bear Flag, in a deal valued at 250 million.
Earnings per share are expected $4.58 for quarter three, which is $2.57 higher than last year. Furthermore, the expected sales growth is 31%.
Deere is closely correlated to the Invesco commodity ETF, and predictions are that the stock could be under pressure in the short term, even if the company’s earnings outperform expectations.
The PDBC commodity ETF has dropped by 4% since Monday, and Deere has slipped over 6%; commodities were falling due to the Delta variant spread and the Fed’s latest minutes revealing hints of tapering to start in October this year.
According to Todd Gordon, founder of Inside Edge Capital Management, Deere stock is bullish long-term and has topped. He believes it won’t fall more than 5%, provided it remains above $315 per share and if its fair value is 18 times next year’s earnings. At the close on Thursday, Deere was trading at $359.
Two traders disagree on the future.
However, the options director from Simpler Trading, Danielle Shay, disagrees with this viewpoint. And her forecast is a surge after the earnings release on Friday.
Her view is that Deere is bullish since their stocks have traded higher after the earnings release for the last six quarters. In addition, their earnings outperformed earnings in the previous two quarters.
Her strategy is to bet on a surge of high overnight volatility and to sell the at-the-money call credit spread and sell the credit spread. Preferably Deere’s earnings will jump, and she can profit from buying back her spreads.
Shay’s price target is at $420, stating her view is bullish long-term since Deere’s agricultural business is solid, turf and agriculture contributing 63% to their total revenue.
Deere expects agriculture and turf equipment sales to rise by 25% by the end of the 2021 fiscal year, while forestry and construction will increase by 30%. MetaNews too update further.