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Deere Earnings to More Than Double in Q2 But Stock Has Limited Upside

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Deere & Company, the world’s largest maker of farm equipment, is expected to report its fiscal second-quarter earnings of $4.49 per share, which represents year-over-year growth of over 112% from $2.11 per share seen in the same period a year ago.

In the last four consecutive quarters, on average, the agricultural, construction, and forestry equipment manufacturer has delivered an earnings surprise of over 60%. The Moline, Illinois-based company would post year-over-year revenue growth of over 28% to $10.5 billion.

The company forecasts net income for fiscal 2021 in the range of $4.6 billion to $5 billion, up from the previous projection of $3.6 billion-$4 billion.

But BMO Capital Markets analyst Joel Tiss downgraded the stock to market perform from outperform, stating that even a bullish scenario for the underlying business wouldn’t cause a big jump for the stock. Deere shares rose over 40% so far this year.

Deere Price Forecast

Sixteen analysts who offered stock ratings for Deere in the last three months forecast the average price in 12 months of $395.44 with a high forecast of $455.00 and a low forecast of $287.00.

The average price target represents a 3.57% increase from the last price of $381.80. Of those 16 analysts, 12 rated “Buy”, three rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price to $410 with a high of $625 under a bull scenario and $181 under the worst-case scenario. The firm gave an “Overweight” rating on the farm equipment maker’s stock.

Several other analysts have also updated their stock outlook. Deere & Company had its price objective boosted by Robert W. Baird to $425 from $375. Robert W. Baird currently has an outperform rating on the industrial products company’s stock.

Stifel Nicolaus raised their price target to $365 from $325 and gave the stock a buy rating. Deutsche Bank raised their price target to $402 from $360 and gave the stock a hold rating.

Analyst Comments

Deere & Company (DE) is one of the highest quality, most defensive names within the broader Machinery universe, given an historically lower cyclicality of Ag Equipment and history of strong management execution. FY21 should mark a tangible acceleration in the NA large ag replacement cycle, as commodity tailwinds are complemented by moderating trade headwinds and improving farmer sentiment,” noted Courtney Yakavonis, equity analyst at Morgan Stanley.

“With mgmt continuing to execute against its 15% mid-cycle operating margin target, we see continued momentum in DE’s margin improvement narrative – representing one of the most attractive idiosyncratic margin improvement narratives in the broader Machinery group.”

Check out FX Empire’s earnings calendar

This article was originally posted on FX Empire