john deere (de) pitch
TRANSCRIPT
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8/7/2019 John Deere (DE) Pitch
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NickBucheleresFebruary18,2011JohnDeere&Co.(DE)Pitch
Agriculturalcommodities,includingcorn,cotton,andsoybeans,havebeenonatear,duetoinflation,naturaldisaster,andrisinginternationaldemand.Increasedinternationaldemand,comingfromemergingmarketsanddevelopedmarketsalike,isquiteinelasticduetothenecessityofmanyofthese
commoditiesintheday-to-daylivingincountriesacrosstheworld.Risingcommoditypricesarebadforconsumers,buttheyarequitetheoppositeforfarmers.Throughout2011farminghasbecomemoreprofitable,anditisbeginningtoshow.Farmersareusinghigherprofitstoincreaseproduction,andincreasedproductionmeansthattheyarepurchasingmoretoolswithwhichtoproduce.ThesefarmersaregoingtoJohnDeerefortheirincreasingagriculturalneeds.
"JohnDeere'sfirst-quarterresultsreflectimprovingdemandforourinnovativelinesofequipmentcoupledwiththeskillfulexecutionofourbusinessplans,"saidSamuelR.Allen,chairmanandchiefexecutiveofficer."Ouractionsarehelpingattractcustomersthrough
advancednewproductsandtechnologies."Salesoflargefarmmachinery,particularlyintheUnitedStatesandCanada,arecontinuingtomakeamajorimpact,whileconstructionequipmentshipmentsareexperiencingsomedegreeofrecovery,Allennoted."Ourrecordfirst-quarterperformanceisespeciallygratifyinginlightofmarketconditionsthatremainbelownormallevelsincertainkeysectors."
JohnDeeresmostrecentquarterlyearnings,asCEOSamuelAllencited,werereleasedthispastweek,andtheywereastonishing.
Netsalesoftheworldwideequipmentoperationsrose30percentforthequarter.Salesincludedpriceincreasesof2percent.EquipmentnetsalesintheUnitedStatesandCanadaincreased35percentforthequarter.OutsidetheU.S.andCanada,netsaleswereup22percentforthequarter,withanunfavorablecurrency-translationeffectof1percent.
ThestrongearningshavehadamarkedeffectonDEstockprice.OnWednesday,February16thwhenJohnDeerereleasedtheirearningsreport,DEshotup$4,or4.3%.Belowistheweeklychart:
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Thestrongvolumespikethatthepricejumpwascatalyzedbyshowsthatthereweremanybuyersandsellersthatmotivatedthepricemove,andthatthebullsgreatlydominatedthebears.Thisisabullishindicatorforlonger-termpricemovement,indicatingthatinvestorsandtradersarereadytobidupthestockpriceonanyauspiciousnews.GivenJohnDeeresmostrecentearningsandearningsforecast,thismeansthatprofitablereportswillpositivelyaffectthestockprice,whilenegativenewswillhavelessofaneffect.
Technical
Aboveisafive-yearchartofJohnDeere(DE)
DEhashadnotroublebreakingthroughitsall-timehighof$95,whichitreachedin2008beforethefinancialmeltdown.MovingAverage:Thepurplelineisthe150-dayexponentialmovingaverage,whiletheblueisthe50-dayexponentialmovingaverage.Thebullishcrossoverin2010signalsfastercurrentpricemovement(50-dayaverage)thanthatofpreviousperiods(150-dayaverage).Theslopeofthe50-dayEMAseemstobeincreasing,signalingmorerapidpriceincreases.Volume:Themostrecentvolumetickshowsaslightrelativeincreasecomparedtopreviousvolume,whichindicatessustainabilityinthecurrentupwardpricemovement.RelativeStrengthIndex:Thischartliesbelowthevolumechartanddepictsspeedofpricechanges.AhighRSIindicatesrapidpriceincreases,whichreaffirmsthecurrentpricetrendofthestock.TheRSIonDEisunusuallyhighandhasbeensoforanunusuallylongperiodoftime.Thismeansthatthecurrentrun-upinpriceisdueforaslightconsolidationperiod,butalsoindicatesthatthestockisshowingrealstrength.
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TrendQualityIndicator:TheTQIaggregatespricemovesovera14-dayperiodandcompilesthestrengthofthemovements,discountingforpricemovementnoise,anddeterminesthequalityandsustainabilityofthemomentumofthemove.Steady,strong,andvoluminoushistoricandcurrenttrendqualityofDEprovesinvestorconfidenceandlongevityinthepricemoves.DEiscurrentlyinformationofastrongtrend,asshownbytheincreasingtriangle.
Thestockpricehasunbridledpotentialduetothefactthatitissettingitsall-timehighs,whichallowsroomforspeculation.Also,investorsthatheldthestockbefore2008andsawlosesduringthefinancialcrisis,thenliquidatedoncethestockreachedthepre-2008levelsthattheyboughtatinordertoclosethepositionwithoutanetloss,areoutofthepicture.Thisminimizessellersandallowsmoreroomforbuyerstobuoythestockprice.Risk
Asaforementioned,JohnDeeresnear-termprofitabilityiscomingasaresultofincreasedprofitabilityoffarmersacrosstheworld.Naturaldisastersandcreditissues,twoofthemostmalevolentfactorsfarmersface,havethepotentialtodisruptmomentuminDEstock
movement.Giventhecurrentparadigm,naturaldisastersthathavethepotentialtowipeoutcropswillincreasethepriceofthosecropsandthusminimizelossesforfarmers,ashasbeencurrentlyhappeningaroundtheworld.Historicallylowinterestratesandimprovingcreditconditionsareallowingfarmerstoborrowmoreeasily,whichfacilitatesincreasedproductionthroughthepurchasingofequipment.AhikeininterestratescouldnegativelyaffectfarmersdemandforJohnDeeresproducts,butinterestrateswillonlyberaisedonceoureconomyissolventenoughtohandlesuchahawkishmove.
BottomLine
Deere&Co.raiseditsfiscal-yearoutlookonWednesdayasNorthAmericaandEuropean
Uniondemandforitstractorcombinesandharvestingequipmentaccelerates,asfarmers
profitfromhistoricallyhighgrainandlivestockprices.
ThebullishoutlookhassparkedmanyinstitutionalinvestorstoincreasetheirprospectsandholdingsofJohnDeere.AfterearningswerereleasedonWednesday,JPMorganraisedJohnDeeretooverweightinanticipationforfuturecompanygains.njbQuestions,[email protected]