While most of America was chowing down on leftovers Friday, Wall Street was dining on Deere (NYSE:DE).

On Wednesday, just ahead of the holiday, tractor maker Deere & Company announced earnings far superior to what street analysts had been looking for. Even better, the company announced new guidance for fiscal 2017 (which has already begun for Deere), promising about $200 million more profit than analysts had built into their estimates.

Wall Street wasted no time in rewarding Deere for its good news. As soon as the holiday-making had ended, investment bankers R.W. Baird, Citigroup, Deutsche Bank, and UBS raised their price targets on Deere stock. TheFly.com further confirms that analysts at Macquarie and Longbow have canceled their underperform ratings on the stock, upgrading Deere to neutral.

Curiously, though, while investors applauded Deere's earnings news on Wednesday, they hardly reacted at all to Wall Street's series of upgrades and price target hikes. Here are a few things to keep in mind when deciding whether to invest in Deere.

Deere stock jumped 11% in response to earnings Wednesday. Image source: Getty Images.

1. Earnings were down, not up

Deere beat earnings estimates with a stick on Wednesday -- there's no debate about that. Expected to earn just $0.39 per share in its fiscal fourth quarter, Deere instead reported profits of $0.90 per share -- more than twice what was expected.

While Deere's earnings were better than expected, though, they were not better than what the company reported last year. To the contrary: Fiscal Q4 2016 earnings showed a 17% year-over-year decline from the $1.08 a share Deere earned in Q4 2015.

Deere's Q4 revenue of $6.5 billion was out of all proportion to the mere $5.4 billion that analysts had expected the company to collect -- a huge surprise. Nonetheless, that revenue was still 3% less than what Deere reported in the year-ago quarter.

2. Revenue may have hit bottom

Still, when a company beats revenue expectations by more than $1 billion, that's kind of a big deal. Multiple analysts keyed off this data point to argue that "a large agriculture equipment bottom is in sight" (Baird) and "signs of a cycle trough are emerging" (Citi).

At the same time, though, analysts at Deutsche Bank grumbled that they're struggling "to gain visibility" into when revenue might actually begin growing again.

3. Guidance is great

What most impressed Wall Street, though, isn't how well Deere performed in Q4 (because it really didn't perform well -- just less bad than expected). Rather, Wall Street was impressed with how Deere's "cost cutting program" (Macquarie) was yielding "remarkably resilient" profits (Baird), with the result that fiscal 2017 guidance is now far "above consensus" (Deutsche Bank).

The most important thing: Valuation

So what is Deere guiding us to expect in this current fiscal year 2017, and what does it imply for the stock's valuation?

In its earnings announcement, Deere predicted that fiscal Q1 2017 sales will be about 4% below Q1 2016 levels. As the year progresses, though, Deere hopes to make up some of those lost sales and end the year with only an "about 1 percent" decline for the year as a whole. As for earnings, Deere says it expects to end the year with $1.4 billion in GAAP net profits.

If this is in fact how things play out, then on the one hand, yes, it will be better than Wall Street was looking for as recently as Tuesday. On the other hand, $1.4 billion will still be 8% less profit than Deere earned in fiscal 2016. In other words, while Deere may be approaching a bottom, it doesn't seem to be there yet. Both sales and earnings are likely to be down this year.

Valuation-wise, if we compare these $1.4 billion in putative profits to Deere's current market capitalization of $32.1 billion, we come up with a price-to-earnings ratio of 22.9 on the stock, which seems pricey for a company that, according to its own guidance, still has not yet hit bottom -- and is not growing earnings, but still shrinking them. Meanwhile, free cash flow at the company remains exceedingly weak -- just $809 million last year, or about $0.53 in real cash profit generated for every $1 in reported "earnings." Valued on free cash flow, Deere stock is pushing a 40-times multiple, and looks even more expensive.

Long story short, I'm not convinced that Wall Street is making the right call here. With both sales and earnings continuing to decline, I fear the analysts have jumped the gun in upgrading Deere stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.