Deere (NYSE:DE) is scheduled to announce its earnings on Thursday, May 15, 2025. Traditionally, the stock has exhibited a slightly greater likelihood of negative one-day returns following earnings reports. An assessment of the previous five years shows that DE encountered a negative one-day return in 55% of these cases, exhibiting a median negative return of -3.0% and a maximum negative return of -14.1%.
For traders focused on events, comprehending these historical trends might provide a potential advantage. There are two main strategies to explore:
- Pre-Earnings Positioning: In light of the historical probability of a negative one-day return, traders might consider taking a position before the earnings announcement.
- Post-Earnings Analysis: Conversely, traders could evaluate the relationship between the immediate stock reaction to the earnings and its following medium-term performance, adjusting their strategies accordingly after the results are out.
It’s essential to understand that while historical data offers context, the actual market reaction will primarily depend on how DE’s reported earnings align with market consensus and expectations. Presently, consensus predictions estimate earnings of $5.64 per share on sales of $10.79 billion. This marks a notable decline compared to the earnings of $8.53 per share on sales of $13.61 billion reported in the same quarter last year, likely due to a drop in demand for farming equipment affecting Deere’s Q2 performance.
From a fundamental viewpoint, Deere & Company holds a current market capitalization of $134 billion. Over the last twelve months, the firm has generated $47 billion in revenue and has demonstrated operational profitability, with $10 billion in operating profits and a net income of $6.2 billion.
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Deere’s Historical Odds Of Positive Post-Earnings Return
Here are some insights regarding one-day (1D) post-earnings returns:
- There are 20 earnings data points noted over the past five years, with 9 positive and 11 negative one-day (1D) returns recorded. In total, positive 1D returns were observed approximately 45% of the time.
- However, this percentage drops to 42% if we analyze data for the last 3 years instead of 5.
- The median of the 9 positive returns = 5.3%, and the median of the 11 negative returns = -3.0%
Further data for the recorded 5-Day (5D), and 21-Day (21D) returns after earnings are included along with the statistics in the table below.
Deere Stock Correlation Between 1D, 5D, and 21D Historical Returns
A relatively less risky approach (although not effective if the correlation is minimal) involves examining the correlation between short-term and medium-term returns following earnings, identifying a pair that demonstrates the highest correlation, and executing the suitable trade. For instance, if 1D and 5D reveal the highest correlation, a trader could take a “long” position for the next 5 days if the 1D post-earnings return is positive. Below is some correlation data based on 5-year and 3-year (more recent) history. Please note that the correlation 1D_5D refers to the relationship between 1D post-earnings returns and subsequent 5D returns.
Is There Any Correlation With Peer Earnings?
Occasionally, peer performance can impact post-earnings stock reaction. In fact, the pricing-in might start before the earnings are disclosed. Below is some historical data on the previous post-earnings performance of Deere stock in comparison with the stock performance of peers that reported earnings just prior to Deere. For a fair analysis, peer stock returns also reflect post-earnings one-day (1D) returns.
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