Monday, November 28, 2016

Ag Equities: "Enough Fawning Over Deere" (DE)

Here's the last nine month's price action via FinViz;

DE Deere & Company daily Stock Chart
Friday's close: $103.92 +1.75
From Bloomberg Gadfly:

Deere & Co. investors bought the rumor. Now they're buying the news, too.
The maker of tractors, planters and other agricultural equipment reported fourth-quarter earnings per share on Wednesday that soundly beat analysts' expectations, thanks largely to cost cuts. Deere also said 2017 sales and net income won't drop quite as much as had been feared. It was a solid showing all around --  but was it really spectacular enough to justify a spike of as much as 11 percent in the stock?

Years of surplus harvests have pressured crop prices and forced farmers to cut back their budgets, spurring three straight years of sales declines at Deere -- the longest slump since at least the 1980s. The $32 billion company's better-than-expected outlook for 2017 signals that the agricultural equipment market is starting to stabilize and that perhaps the worst of the revenue rout is over.

But here's the thing: Deere was already trading as if a recovery was nigh. At the start of the week, the stock traded at about $92 a share, its highest price since August 2015 and about 7 percent higher than analysts' average 12-month price target. After Wednesday's gains, it's now trading at a record. The negative spread between the stock price and analysts' average price target hasn't been this wide in at least a decade.

Who's Wrong Here?
Deere's surge has left anlaysts' average price target in the dust...