Analysis: DE SPGI AGCO

While some 55 million folks hit the road tomorrow for the Thanksgiving holiday, tomorrow morning brings use the latest quarterly results from Deere & Co. (DE) and the November Flash PMI data published by S&P Global (SPGI) . With some members traveling and others getting ready for the holiday feast, we wanted to share what's expected for both of those today. Here we go:

Deere Earnings

Before the stock market opens tomorrow, Deere will publish its October quarter results, which are expected to see it harvest EPS of $7.11 on revenue of $13.39 billion, up dramatically year over year. For the current quarter the consensus EPS forecast is $5.52 on a range of $4.33-$6.82, while the stats for revenue are $10.73 billion on a range of $8.67-$12.12 billion.

With key commodity ag prices up vs. year ago levels and the adoption of precision ag equipment to drive production and reduce the need for fertilizers, the demand side of the picture continues to be favorable.

Comments from ag equipment competitor AGCO (AGCO) earlier this month were that "Global end market demand remains at high level and demand for our products continues to be strong." AGCO also shared it order board extended well into the second half of 2023. Clearly the demand picture continues to remain favorable for ag equipment and we expect Deere to reiterate that tomorrow.

AGCO also spoke to continued supply chain and bottleneck issues that continued to improve but still lingered. To us that will be the make-or-break issue for Deere's quarterly results, and it will put margins under the microscope. We expect Deere to discuss its growing use of technology in its products, which should bolster selling prices even as they drive farmer productivity.

One potential risk with Deere's shares is the guidance. As we have once again seen, forward guidance that isn't picture perfect could pressure a company's shares. With DE shares having risen 43% since early July vs. the analogous 4% move in the S&P 500, Deere will need to deliver pristine guidance.

From a technical perspective we see strong support for DE shares at $401 and then $395, but if the shares pulled back by more than that we may be inclined to round out the portfolio's position size. It currently sits at 3.7% of the portfolio's assets.

Watching the November US Flash PMIs

At 9:45 am ET, S&P Global will publish its November US Flash Manufacturing and Services PMIs, and we will be watching this closely given the relationship to revenue per share prospects for the S&P 500 group of companies. Members can see that in the charts below.

We have to note that these charts show the relationship between the PMI data from the Institute for Supply Management (ISM) and revenue per share prospects for the S&P 500 group of companies.

While there are differences between how ISM and S&P Global tally their respective PMI data sets, we will be taking a hard look at what the November Flash data from S&P Global has to say, in part because it could lead to revisions for what's expected from ISM's November findings out next week.

If that's the picture we get, it would argue revenue expectations for the current quarter will need to be revised lower. We'll also be taking a hard look at the new order data contained in S&P Global's Flash November findings. Should it signal further weakness ahead that would point to further slowing in the data and add to our concern over December quarter revenue expectations.

The thing to keep in mind is the correlation is for the S&P 500 group of companies and not any particular company or sector. For that we'll have to dig deeper as we move further into the second half of the quarter.