Shares of Deere (DE, $30.26, down $2.84) are getting crushed this morning after the company missed Wall Street’s expectations once again. The company reported profits of $345 million, or $0.81 a share compared to last year’s quarter of $422 million, or $0.94 a share. Wall Street had expectations of $0.99 a share.
Back in May when Deere was at $80, the company missed estimates by a penny. In August, when the stock was at $60, they missed by four cents. Although I didn’t recommend any put option plays at the time, I did say “stay out of the headlights”.
And I said this:
“The sell-off in Deere has put the stock near its 52-week low but the real key was when the stock fell below $80. Once that happened you could clearly see the breakdown was coming. Deere’s earnings report was the straw that broke the camel’s back.”
Yeap, I blew this one. We missed the downtown train on that one, folks. Sorry. The Deere December 60 puts (DEXL, $30.53, up $2.63) were probably selling for $5 back in August…
Now the company misses by 18 cents a share. Of course, Wall Street’s only worried about the company’s agriculture equipment sales which are expected to grow only 5% next year, down from 15% not so long ago. Yikes.
Deere has gotten a 60% haircut in just six months and fallen from $80 to $30. The stock now has a PE of 6, a book value of $18 and trades at 1 1/2 times that. Historically, that is what you call a blue-light special. However, there is a new wave of the market that is being ushered in and people are trading instead of buying and holding.
I’ve been saying for years that the buy-and-hold theory has been dead money and it is only now that I am hearing the talking heads say the same thing. The real wealth in the market comes from option trading and here at OptionsMentoring.com, we can teach you this. There are so many strategies you can deploy in markets like these and it is one of the best environments ever to be trading.
There may come a time when Deere provides us with a trading opportunity to go long but there still appears to be some downside risk. Bearish options traders are targeting the December 25 puts (DEXE, $0.85, up $0.17) which have traded over 2,000 thus far.
Rick Rouse
Rick@OptionsMentoring.com












Deere Plows Through Wall Street’s Estimates
Wednesday, February 17th, 2010
8:50am (EST)
The bulls started the week with a win after better-than-expected corporate and economic news on Tuesday. The Dow finished with a triple-digit gain, up 169 points, and closed at 10,268. The S&P 500 closed at 1,094, up 19, while the Nasdaq added 31 points to settle at 2,214.
Dow futures are up big this morning as the Asian markets have already put in a good day. The index futures are up 44 points before the bell. The S&P 500 futures are higher by 6 as that index looks to take out the 1,100 level.
The Nasdaq 100 futures are also showing a pop and are up 8 points as we head towards the open.
In earnings news, Deere (DE, $53.78, up $0.67) blew away Wall Street this morning as the company reported a profit of $243 million, or $0.57 a share, versus $204 million, or $0.48 a share, in the year ago quarter.
Revenue came in at $4.2 billion, down from $4.6 billion, but Deere upped its 2010 guidance which is what we were hoping for. The company put the icing on the cake after projecting equipment sales to be up 6% to 8% for the year.
The earnings surprise was jaw-dropping as Wall Street expected Deere to report earnings of $0.19 a share on sales of $4.1 billion.
Our channel checks indicated the company would have a blowout quarter but even we are surprised on how much they beat forecasts. We had penciled in 25 cents a share for earnings but they DOUBLED that!
As a result, the stock is trading near $58 in pre-market trading.
Another stock that is also enjoying a higher open this morning is Whole Foods Market (WFMI, $30.52, up $0.77). Shares are trading near $33 after the company also beat Wall Street’s estimates.
We covered both Deere and Whole Foods Market in our Members Area yesterday and made Deere an official recommendation by 11am. We sent out a trade alert after doing more research. Both trades should do rather well this morning as the returns could be greater than 100% for each.
We provide details on how to protect profits and play Deere from here on out in the Members Area. Current subscribers, check for the updates.
Tags: Deere earnings, option picks, option signals, options alerts, stock options trading, Whole Foods Market earnings
Posted in Company Commentary, Earnings, Market Analysis, Market Commentary, Option Trades, Strategies, Trading Psychology, Trading Tips | Comments Off