Shares of John Deere rallied more than 1.5% percent on Wednesday into a new short-term rally following last week’s positive earnings report.
Last Thursday, the heavy machinery manufacturer reported earnings that were eight cents better than analysts’ expectations at $3.19 per share. In A twist, the company missed its revenue expectations which showed a 35.1% decrease from the same quarter last year.
John Deere has been going through a Down cycle in its agricultural products as the farming industry has suffered through a slowdown in the past two years.
Investors’ reaction to the earnings report is one of relief as the company had been expected to report weaker figures on both revenue and earnings per share. Management’s cuts to operations and expenses were touted as the difference between a bad and mediocre earnings report.
Looking forward, Deere’s management offered a relatively bleak outlook as the company expects the downcycle to continue its trend with the company depending on heavy cost-cutting and inventory control measures to maintain margins.
From a chart perspective, sentiment towards John Deere is running high as investors have bid the stock to new all-time highs.
Deere stock is trading in a long-term bull market trend with intermediate-term trendlines indicating an extension of the new rally.
This week’s move above $500 has occurred on heavier than normal trading volume, suggesting that investors are trying to move into the stock ahead of what is expected to be a long-term turnaround in the fundamentals for Deere stock.
Sentiment on Deere shares is lukewarm with more than half of the Wall Street analysts currently ranking the stock a “hold”. This suggests that while the stock is trading at new highs, investors should expect some headwinds based on the double-digit revenue decline.
For now, short-term traders should expect shares of Deere & Company to continue their ascent as the stock’s 50-day moving average just shifted into a new bullish trend. This trend suggests that the stock should see higher prices over the next 4–6-week period with a price target of $550.
