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Summary

  • Three insiders sold Deere & Company stock within one month.
  • The stock was not purchased by any insiders in the month of intensive selling.
  • All three of these insiders decreased their holdings by more than 10%.

Deere & Company (NYSE:DE) manufactures and distributes agriculture and turf, and construction and forestry equipment worldwide.

(click to enlarge)

Insider selling during the last 30 days

Here is a table of Deere & Company's insider activity during the last 30 days.

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Jean GillesSVPApril 4-822,650Yes54,202 shares29.5%
James FieldPresident, A&TApril 413,380Yes64,550 shares17.2%
Samuel AllenCEOApril 2-332,371Yes280,150 shares10.4%

There have been 68,401 shares sold by insiders during the last 30 days. All these shares were sold pursuant to a Rule 10b5-1 plan.

SEC Rule 10b5-1 is a regulation enacted by the United States Securities and Exchange Commission (SEC) in 2000. The SEC states that Rule 10b5-1 was enacted in order to resolve an unsettled issue over the definition of insider trading, which is prohibited by SEC Rule 10b-5. After Rule 10b5-1 was enacted, the SEC staff publicly took the position that canceling a planned trade made under the safe harbor does not constitute insider trading, even if the person was aware of the inside information when canceling the trade. This staff interpretation raises the possibility that executives can exploit this safe harbor by entering into 10b5-1 trading plans before they have inside information while retaining the option to later cancel those plans based on inside information.

For example, a CEO of a company could call a broker on January 1 and enter into a plan to sell a particular quantity of shares of his company's stock on March 1, find out terrible news about his company on February 1 that will not become public until April 1, and then go forward with the March 1 sale anyway, saving himself from losing money when the bad news becomes public. Under the terms of Rule 10b5-1(b) this is insider trading because the CEO "was aware" of the inside information when he made the trade. But he can assert an affirmative defense under Rule 10b5-1(c), because he planned the trade before he learned the inside information.

In general, it is a safer way for an insider to sell shares pursuant to a Rule 10b5-1 trading plan than without it.

Insider selling by calendar month

Here is a table of Deere & Company's insider activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
April 201468,4010
March 201400
February 201400
January 201400
December 201300
November 201300
October 201300
September 201300
August 20134,6720
July 201300
June 201300
May 201300
April 201300
March 201300
February 201300
January 2013192,8700

There have been 265,943 shares sold, and there have been zero shares purchased by insiders since January 2013.

Financials

Deere & Company reported the fiscal 2014 first-quarter, which ended January 31, financial results on February 12 with the following highlights:

Revenue$7.7 billion
Net income$681.1 million
Cash$4.6 billion
Debt$34.4 billion

(click to enlarge)

(Source: Earnings presentation)

The three insiders sold their shares after these results.

Outlook

Company equipment sales are projected to decrease about 3 percent for fiscal 2014 and be down about 6 percent for the second quarter compared with the same periods of 2013. For the full year, net income attributable to Deere & Company is anticipated to be approximately $3.3 billion.

(click to enlarge)

(Source: Earnings presentation)

Competition

Deere & Company's competitors include AGCO Corporation (NYSE:AGCO), Caterpillar (NYSE:CAT), and Kubota Corporation (OTCPK:KUBTY). Here is a table comparing these companies.

CompanyDEAGCOCATKUBTY
Market Cap:34.52B5.25B65.69B16.52B
Employees:67,04422,111118,50131,436
Qtrly Rev Growth (yoy):0.030.06-0.100.28
Revenue:38.03B10.79B55.66B18.13B
Gross Margin:0.300.220.260.29
EBITDA:6.56B1.16B8.72B2.73B
Operating Margin:0.140.080.100.13
Net Income:3.57B597.20M3.79B1.53B
EPS:9.286.015.756.08
P/E:10.079.3217.9110.83
PEG (5 yr expected):1.361.051.291.05
P/S:0.900.481.170.91

Deere & Company has the highest PEG ratio among these four companies.

Here is a table of these competitors' insider activities this year.

CompanyInsider buying / sharesInsider selling / shares
AGCO832,4075,000
CAT045,713
KUBTYN/AN/A

Only Deere & Company has seen intensive insider selling during the last 30 days.

Conclusion

There have been three different insiders selling Deere & Company, and there have not been any insiders buying Deere & Company during the last 30 days. All three of these insiders decreased their holdings by more than 10%. Deere & Company has an insider ownership of 7.18%.

There are four analyst buy ratings, 11 neutral ratings, and eight sell ratings with an average price target of $87.95. Before going short Deere & Company, I would like to get a bearish confirmation from the Point & Figure chart. The four main reasons for the proposed short entry are a relatively high PEG ratio, bearish analyst price targets, weak revenue guidance, and the intensive insider-selling activity.

Source: Deere & Company: 3 Different Insiders Have Sold Shares This Month