Deere (DE) - Get Report shares were under pressure Wednesday, falling about 3% after the company reported decent fourth-quarter earnings results but full-year guidance came up short of expectations. But because the stock is bouncing from the lows, investors are wondering if Deere is a buy-the-dip situation.
Earnings of $2.14 a share were in-line with expectations, while revenue of $8.7 billion grew 4.3% year over year and coasted by analysts' estimates by nearly $300 million.
Given that Deere stock had hit new 52-week highs earlier this month before pulling back slightly, the stock would have likely rallied back to these highs if the quarter were only based on these headline results.
Instead though, guidance ruined what was otherwise an OK-looking report. Management expects global agriculture sales to fall 5% to 10% in the new fiscal year and for construction and forestry sales to fall 10% to 15%. Further, Deere also cut net income estimates from $3.2 billion to a range of $2.7 to $3.1 billion.
Management said uncertainty around the trade war has caused farmers to be hesitant about ordering new equipment.
It's surprising Deere shares aren't down more after a quarter like this, which makes the stock an interesting pick for Real Money'sStock of the Day.
Trading Deere Stock
After opening lower on the day, Deere stock was bouncing quickly and even briefly reclaimed the 50-day moving average. However, DE stock ultimately failed to hold above that mark, and has since fallen below the $167.50 mark and the 78.6% retracement.
Deere might have reported decent headline numbers, but management just told us that customers are hesitating to place new orders and cut their outlook for the next 12 months of business. While other companies are doing great, Deere is clearly struggling.
That may mean we need the stock to trade at a larger discount before buyers step in. It's not clear if we'll get a dip down into the $157.50 to $160 area, but this would be a reasonable area to begin considering DE stock on the long side.
There, shares will be 10% to 12% off the highs, and trading near uptrend support and the 200-day moving average. A break below this area will tell investors that more downside is likely coming. Remember, Deere has visited sub-$145 multiple times this year. There's no need to get in front of a falling knife unless there is a reasonable risk/reward setup on the charts.
On a bounce, bulls need to see DE stock reclaim the 78.6% retracement and 50-day moving average. Above these marks and $177.50+ is possible.
This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.