Deere (NYSE:DE) is set to report its earnings on Thursday, May 15, 2025. Historically, the stock has shown a slightly higher tendency for negative one-day returns following earnings announcements. An analysis of the past five years indicates that DE experienced a negative one-day return in 55% of these instances, with a median negative return of -3.0% and a maximum negative return of -14.1%.
For event-driven traders, understanding these historical patterns could offer a potential edge. There are two primary strategies to consider:
- Pre-Earnings Positioning: Based on the historical probability of a negative one-day return, traders might consider establishing a position before the earnings announcement.
- Post-Earnings Analysis: Alternatively, traders could analyze the correlation between the immediate stock reaction to the earnings and its subsequent medium-term performance, positioning themselves accordingly after the results are released.
It’s important to note that while historical data provides context, the actual market reaction will largely depend on how DE’s reported earnings compare to market consensus and expectations. Currently, consensus estimates project earnings of $5.64 per share on sales of $10.79 billion. This represents a significant 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 decrease in demand for farming equipment impacting Deere’s Q2 performance.
From a fundamental perspective, Deere & Company has a current market capitalization of $134 billion. Over the last twelve months, the company generated $47 billion in revenue and demonstrated operational profitability, with $10 billion in operating profits and a net income of $6.2 billion.
That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative — having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
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Deere’s Historical Odds Of Positive Post-Earnings Return
Some observations on one-day (1D) post-earnings returns:
- There are 20 earnings data points recorded over the last five years, with 9 positive and 11 negative one-day (1D) returns observed. In summary, positive 1D returns were seen about 45% of the time.
- However, this percentage decreases to 42% if we consider data for the last 3 years instead of 5.
- Median of the 9 positive returns = 5.3%, and median of the 11 negative returns = -3.0%
Additional data for observed 5-Day (5D), and 21-Day (21D) returns post earnings are summarized along with the statistics in the table below.
DE 1D, 5D, and 21D Post Earnings Return
Correlation Between 1D, 5D, and 21D Historical Returns
A relatively less risky strategy (though not useful if the correlation is low) is to understand the correlation between short-term and medium-term returns post earnings, find a pair that has the highest correlation, and execute the appropriate trade. For example, if 1D and 5D show the highest correlation, a trader can position themselves “long” for the next 5 days if 1D post-earnings return is positive. Here is some correlation data based on 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to the correlation between 1D post-earnings returns and subsequent 5D returns.
DE Correlation Between 1D, 5D and 21D Historical Returns
Is There Any Correlation With Peer Earnings?
Sometimes, peer performance can have influence on post-earnings stock reaction. In fact, the pricing-in might begin before the earnings are announced. Here is some historical data on the past post-earnings performance of Deere stock compared with the stock performance of peers that reported earnings just before Deere. For fair comparison, peer stock returns also represent post-earnings one-day (1D) returns.
DE Correlation With Peer Earnings
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
