Deere & Company (NYSE: DE) shares have performed very well over the past six months, but one Wall Street analyst said Wednesday Deere may have finally run out of gas.
Bank of America analyst Ross Gilardi downgraded Deere from Buy to Neutral and cut his price target for the stock from $173 to $170.
Gilardi said Deere’s risk-reward skew is mostly balanced after its impressive run. Since last April, Deere has significantly outperformed both its primary rival Caterpillar, Inc. (NYSE: CAT) and the overall S&P Machinery group. He said Deere will likely need an earnings beat this week and a guidance hike to maintain its premium valuation relative to Caterpillar.
Gilardi said Deere’s 2019 guidance is achievable, but investors shouldn’t be expecting any more guidance hikes in the near term. Gilardi said Wirtgen’s guidance is likely safe, but upside is unlikely given a softening European economy, particularly in Germany.
In addition, he said Deere will likely need a trade deal between the U.S. and China to happen soon. He said farm equipment demand could take a big hit this year of China’s current soybean tariffs remain in place.
“Deere has shrugged off a few mediocre quarters this year, but might not be as forgiving this time due to the premium in the stock,” Gilardi wrote in the note.
In addition to the downgrade, Gilardi lowered his 2019 and 2020 EPS estimates by between 2 and 3 percent to $11.25 and $12.90, respectively.
Deere traded lower by 1.7 percent on Wednesday to $162.28. The company is scheduled to report first-quarter earnings Friday morning.
Earnings Potpourri: Coca-Cola, Deere, Cisco Report This Week, But Trade Talks Dominate
Latest Ratings for DE
|Feb 2019||Bank of America||Downgrades||Buy||Neutral|
|Sep 2018||Deutsche Bank||Reinstates||Hold|
|Aug 2018||Wells Fargo||Maintains||Outperform||Outperform|
View More Analyst Ratings for DE
View the Latest Analyst Ratings
See more from Benzinga
© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.