Why Deere (DE) Stock Is Down Today

NEW YORK (TheStreet) -- Deere (DE) was falling 0.4% to $83.43 Tuesday after announcing that it will explore strategic option for its crop insurance business.

The farm equipment maker said that it hired Citigroup (C) as its adviser to explore its options for the business. Deere's crop insurance company currently underwrites policies through John Deere Insurance Company, a unit of John Deere Financial.

Deere said it hasn't yet made any formal decisions about the business, and no agreements have been reached.

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TheStreet Ratings team rates DEERE & CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate DEERE & CO (DE) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its attractive valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • DE, with its decline in revenue, slightly underperformed the industry average of 4.1%. Since the same quarter one year prior, revenues slightly dropped by 5.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Machinery industry and the overall market, DEERE & CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • DEERE & CO's earnings per share declined by 9.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, DEERE & CO increased its bottom line by earning $9.08 versus $7.64 in the prior year. For the next year, the market is expecting a contraction of 7.5% in earnings ($8.40 versus $9.08).
  • In its most recent trading session, DE has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
  • You can view the full analysis from the report here: DE Ratings Report

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