Deere Set to Mow Over the Competition

Aug.16.10 | About: Deere & (DE)

EPS Estimates (High/Mean/Low): $1.61 / $1.224 / $1.03

Deere & Co. (NYSE: DE) is set to report fiscal Q3 estimates this Wednesday after the bell, and with mean estimates pegged at $1.224, the Street is expecting the iconic American brand to manage 20%+ YoY EPS gains.

Deere, which operates in three business segments: agriculture and turf, construction and forestry, and credit, put together quite a rally through July and early-August, but has fallen on hard times as of late. Wheat shortages, wild fires, and selectively better-than-expected global and economic data buoyed shares at the $50 range as June came to a close and then shot them higher, eventually topping out at $69.48 this past Monday. However, shares got hit hard last week, falling as much as 8% and closing out the week at $64.11.

DE has beaten estimates in seven of the past eleven quarters and the past five in a row. They reported $1.58/share of profits last Q vs. estimates of $1.09. DE was upgraded to Buy from Hold by Longbow Research on the 9th. Longbow put an $86 target on shares.

Having traded off a few bucks, DE seems a bit more palatable than it was at its parabolic highs. Nonetheless, this still may not be the time to jump in. Shares of Deere will trade alongside the commodities complex and are keyed to macro data. So, whether you decide to accumulate shares or not should be based to a great degree on your outlook for those measures of economic health.

Shares have yet to stabilize from their recent drop, and you won’t want to go long until they do. Your best bet is probably to wait to act until the numbers come out, as playing this one into the Q amounts to little more than a roll of the dice. If you’re a holder of shares, picking up some protection is advisable.

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Disclosure: No holdings in DE.