DE Stock Falls as Inflation and Supply Chain Worries Rise

  • Deere & Company (NYSE:DE) reported largely positive Q2 earnings today
  • However, concerns about inflation and supply chain problems are sending DE stock down
  • Shares of DE stock are down about 12% at the time of writing
Several John Deere vehicles are parked outside of a building.
Source: Jim Lambert / Shutterstock.com

Deere & Company (NYSE:DE) reported Q2 earnings this morning. The company beat earnings estimates by 10 cents, reporting a profit of $6.81 per share. That’s a 20% boost from last year. An increase in worldwide crop prices helped in this regard. However, the company’s revenue missed Wall Street forecasts, sending its stock sharply lower alongside inflation and supply chain concerns.

Prior to today, DE stock had been up about 4% on the year, hitting a record high of $446.76 in March. The company’s shares are now changing hands at $320.67 at the time of writing.

What Happened During DE Stock Earnings

Deere & Co. also raised its annual profit outlook for this year, saying it expects a boost from farm-equipment demand. That demand looks to remain strong and outpace inflation as well as supply-chain snarls that have impacted delivery schedules in recent months.

Additionally, the company’s worldwide sales in the quarter rose 11% from a year ago to $13.37 billion, narrowly beating analysts’ forecasts of $13.36 billion.

Looking ahead, the company forecast net income of between $7 billion and $7.4 billion for the entire year, up from an earlier forecast of $6.7 billion to $7.1 billion. Deere attributed the upward revision to strong demand for farm equipment and rising crop prices.

Why It Matters

While Deere & Co.’s quarterly earnings were decent, and raising its forward guidance is positive, the company has not succeeded in persuading analysts and investors that it can overcome the ongoing supply chain problems that are afflicting companies worldwide.

On top of that, inflation remains a concerns for many investors. Can demand for Deere’s equipment outrun inflation that is running at a 40-year high in much of the world? Only time will tell. Rising interest rates could also put a crimp in equipment sales throughout this year as companies put off capital expenditures.

While Deere’s latest results were strong, there are simply too many uncertainties for investors moving forward.

What’s Next for DE Stock

DE stock is suffering a steep drop today. While disappointing, shareholders can take comfort in the fact that Deere & Co. outperformed the broader market this year up until today. If the company can continue to post strong earnings throughout the remainder of this year, its stock will likely recover and continue advancing.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.


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