Investors Should Run Away From Deere Stock (DE)

This has been an absolutely brutal time to be in the industrial or agricultural machinery business. Companies in this segment have been hit by weak demand at home, while a sluggish global economy has put a damper on growth abroad too.

Investors Should Run Away From Deere Stock (DE)A poster child for this weakness is Deere (DE) as the stock has declined about 13% in the past three months and is underperforming the S&P 500 on a year to date look too.

This weak performance isn’t too surprising when you consider Deere’s last earnings report. Earnings for Q3 2015 plunged 34% when compared to the previous year while sales were off more than 20%, too.

The pain doesn’t end there though as the company is now looking for similar declines in both the Q4 and overall FY 2015 time frames, thanks in large part to awful sales projections for the Agriculture and Turf segment.

DE Earnings Estimates Continue to Drop 

Thanks to these projections from last quarter, analysts covering DE stock have been racing to slash their estimates for Deere. In fact, in the last 60 days, we have seen one estimate go higher for the current year compared to eight lower, while the next year time frame has seen nine go lower over the past two months.

The magnitude of these revisions should also be troublesome to investors as the Zacks Consensus Estimate has crumbled from $5.65 per share 90 days ago to $5.42 per share today, while the next year time period and the current quarter estimates have fallen, respectively, 16% and 33% in the past ninety days as
well.

With such a bearish outlook, it shouldn’t be surprising to note that DE has a Zacks Rank #5 (Strong Sell). And given the broad problems this space is facing, we should also point out that the Machinery-Farming segment is in the bottom 10% of all Zacks Industries too, suggesting more pain is likely to
come for the sector.

The Bottom Line for DE Stock is Poor 

DE has seen some turbulent trading and it looks as if it might see more losses with its coming earnings report. But the segment isn’t really a space you want to be in at all, as there are no companies currently ranked better than ‘3’ right now in the industry.

If you are looking for a machinery company, it might be time to take a closer look at the small cap name of Columbus McKinnon (CMCO). This is also in the machinery world — material handling products — but the stock is actually in a top 20% industry with a top Zacks Rank #1 (strong buy) to boot.

So if you are desperate for machinery stocks, consider looking beyond the more famous Deere
and inspecting the top ranked CMCO instead this earnings season.

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