3 Reasons Deere & Company Could Report Dismal Earnings Tomorrow

Farm equipment manufacturer Deere & Company DE have fallen more that 4 percent since Tuesday going into its earnings. The company is scheduled to report its third-quarter earnings on Friday before the market opening and analysts expect it to declare EPS of $1.44 on revenue of $7.27 billion.

Eli Lustgarten from Longbow Research is bearish on Deere going into its earnings. Lustgarten was on CNBC recently to explain why.

Farming Sector Is Weak

"Well, Deere's third quarter is coming out when the overall market for farm equipment and construction actually is weakening," Lustgarten began. "And the farm sector is far weaker than I think anybody expected."

Related Link: Earnings Focus On Deere's Strategy Fix

Commodity Prices Have Collapsed

He continued, "Commodity prices in general are weak, and ag. is not immune from it. And we are having big crops, big yields, big carryovers, lower prices across the board in ag. The dollar is hurting the farm sector significantly. We are seeing new crop corn orders at eight-year low, new crop soybean at its six-year low."

Early Order Programs And Outside Markets

"Early order programs for Deere are not doing very well [...] they have too much inventory and probably next year will be a down year. That's not what's really factored into the market. And outsized the U.S., the key markets for Deere – which are Brazil, Russia, China – are all basket cases. And Deere has a substantial new investment in Brazil, which will hurt them," Lustgarten concluded.