Is This the Week to Buy Deere & C...
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Jonathan Yates
Is This the Week to Buy Deere & Co. for the Long Term?

Deere & Co. (NYSE: DE), the farm and construction machinery giant that makes the John Deere line of tractor and other equipment, reports its earnings on Wednesday.  Based on the trending of the stock price, it appears as if the earnings report will disappoint Wall Street.  Deere & Co. is down almost 2% for the last week of market action, and off by nearly 3% for the last month.

In the short term, it appears as if Deere & Co. will continue to decline, as shown by the chart below.

But there is much about Deere & Co. that should make it a very rewarding stock to own over the long term.  At present, the price-to-earnings ratio for Deere & Co. is just 10.  That is almost half as low as the average for a member of the Standard & Poore’s 500 Index (NYSE: SPY).  In addition, analysts project that the price-to-earnings ratio for Deere & Co. will go even lower.

Deere & Co. is also selling for less than its sales.  The price-to-sales ratio for Deere & Co. is 0.84.  That means that each dollar of sales for Deere & Co. is selling at more than a 15% discount in the price of a share of the stock.

Even if Deere & Co. continues to decline in price, the dividend yield pays for shareholder waiting for the rebound.  At present, the dividend for Deere & Co. is around 2.50%.  For a member of the Standard & Poor’s 500 Index, it is around 2%.  Deere & Co. has plenty of cash flow to raise the dividend, too.  It has a history of increasing its dividend.

It has been a difficult time for the farming sector: stocks such as Caterpillar (NYSE: CAT) and Potash of Saskatchewan (NYSE: POT) are off.  But, as detailed in other articles on this site, that creates an opportunity to buy at a discount for the long term.  Such an opening could be developing with Deere & Co. based on the earnings report this week.



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