What Happened?
Shares of agricultural and construction machinery company Deere (NYSE: DE) jumped 8.5% in the afternoon session after the company reported impressive third-quarter results that exceeded analysts' revenue and EPS estimates. Looking ahead, the company initiated fiscal 2025 guidance, calling for revenues down 10-15% year on year. While this may sound like a negative, it does show that end markets are not getting worse and may be reaching a trough. Zooming out, we think this was a good quarter with guidance showing that demand may be hitting a bottom in 2025 and poised for an uptick thereafter, especially if themes like reshoring and industrial automation become more real.
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What The Market Is Telling Us
Deere’s shares are not very volatile and have only had 2 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock gained 6.7% on the news that the company reported second quarter earnings results, with revenue and EPS exceeding Wall Street's expectations. Gross margin also improved significantly during the quarter and free cash flow came in positive. On the other hand, the company called out "challenging conditions in the global agricultural and construction sectors" and lowered its full year outlook further for the Construction and Forestry industry. Zooming out, we think this was a mixed but decent quarter for the company.
Deere is up 10.2% since the beginning of the year, and at $441.45 per share, has set a new 52-week high. Investors who bought $1,000 worth of Deere’s shares 5 years ago would now be looking at an investment worth $2,508.
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