What Happened?

Shares of agricultural and construction machinery company Deere (NYSE: DE) jumped 5% in the morning session after the company turned in an impressive second quarter, with both sales and earnings beating expectations, even though sales overall were down quite a bit from the previous year. 

The company managed to hold the line on margins and showed it could still deliver in a tough market. Sales in its big farming segment, Production & Precision Ag, dropped 21%. But the margin was still solid at 22%. Over in Small Ag & Turf, revenue dipped 6%, but profits edged higher. That margin strength gave earnings a nice lift, and EPS came in above forecasts. Deere largely didn't change its full-year outlook, but it did say Small Ag & Turf could be a bit weaker than expected. Overall, this was a mixed yet decent quarter.

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What The Market Is Telling Us

Deere’s shares are not very volatile and have only had 4 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 6 months ago when the stock gained 8.5% on the news that the company reported impressive third-quarter 2024 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 felt like a negative, it revealed that end markets were not getting worse and might 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.

Deere is up 25% since the beginning of the year, and at $522.67 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 $4,148.

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