Key arguments in support of the idea.
• Excessive Optimism Amid a Weak Market.
• Economic Uncertainty Driven by Trump’s Policies.
Investment Thesis
The recent surge in Deere & Co. (DE) stock is difficult to justify. Despite the company’s
technological edge, the agriculture equipment market remains weak. Recent earnings
from competitors CNH Industrial (CNH) and AGCO Corporation (AGCO) painted a grim
outlook for 2025, with both reporting continued sales declines in Q4 2024 and
disappointing margin forecasts.
Following DE’s earnings release, the stock rallied over 15%, even as the consensus EPS
estimate for FY25 was revised downward from $21.86 to $19.43. Industry weakness is
further confirmed by AEM reports. Notably, none of the major players provided clear
guidance on how tariff increases would impact them, aside from vague hints that pricing
adjustments might be necessary.
Even if higher tariffs result in a supply shortage for agricultural equipment and spare
parts in the U.S., we do not expect significant optimism for the sector. While price
adjustments may provide some support, 2025 is shaping up to be a challenging year for
farmers:
• Tariff hikes could delay interest rate cuts, making it harder to finance new equipment
purchases.
• Trump has frozen IRA farm subsidies and initiated a deportation program, potentially
leading to labor shortages.
• According to Bloomberg consensus forecasts, corn and soybean prices are unlikely
to rise, further pressuring farm incomes.
Price Action & Trading Outlook
Historically, DE has traded within a wide range, often experiencing pullbacks after post-
earnings rallies, especially when the run-up lacked clear catalysts. While the stock has a
track record of beating consensus estimates, the current setup presents a high risk of
correction given its elevated valuation multiples and macro headwinds.
We anticipate a downside move to $432 over the next two months, with a stop-loss at
$505.
• Excessive Optimism Amid a Weak Market.
• Economic Uncertainty Driven by Trump’s Policies.
Investment Thesis
The recent surge in Deere & Co. (DE) stock is difficult to justify. Despite the company’s
technological edge, the agriculture equipment market remains weak. Recent earnings
from competitors CNH Industrial (CNH) and AGCO Corporation (AGCO) painted a grim
outlook for 2025, with both reporting continued sales declines in Q4 2024 and
disappointing margin forecasts.
Following DE’s earnings release, the stock rallied over 15%, even as the consensus EPS
estimate for FY25 was revised downward from $21.86 to $19.43. Industry weakness is
further confirmed by AEM reports. Notably, none of the major players provided clear
guidance on how tariff increases would impact them, aside from vague hints that pricing
adjustments might be necessary.
Even if higher tariffs result in a supply shortage for agricultural equipment and spare
parts in the U.S., we do not expect significant optimism for the sector. While price
adjustments may provide some support, 2025 is shaping up to be a challenging year for
farmers:
• Tariff hikes could delay interest rate cuts, making it harder to finance new equipment
purchases.
• Trump has frozen IRA farm subsidies and initiated a deportation program, potentially
leading to labor shortages.
• According to Bloomberg consensus forecasts, corn and soybean prices are unlikely
to rise, further pressuring farm incomes.
Price Action & Trading Outlook
Historically, DE has traded within a wide range, often experiencing pullbacks after post-
earnings rallies, especially when the run-up lacked clear catalysts. While the stock has a
track record of beating consensus estimates, the current setup presents a high risk of
correction given its elevated valuation multiples and macro headwinds.
We anticipate a downside move to $432 over the next two months, with a stop-loss at
$505.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.