Deutsche Bank Starts Deere (DE) at Hold
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Deutsche Bank initiated coverage on Deere (NYSE: DE) with a Hold rating and a price target of $90.
Analyst Nicole DeBlase said, "On the 3QFY17e earnings call, Deere management noted that it can deliver $500m of incremental run-rate pre-tax savings by year-end FY18e, along with 300bps of mid-cycle margin improvement vs. last cycle. This seems achievable, based on COGS, SAG, and R&D cost reductions, and will result in ~13% Equipment Ops margins, consistent with prior peak levels. However, we do not subscribe to management’s view of mid-cycle volumes (7-year rolling average methodology); we believe much of the last seven years benefited from a period of overinvestment in Ag equipment in North America. As such, we take a 10% discount to the company’s mid-cycle volume assumption, yielding ~$7 mid-cycle EPS vs. a calculated $8.33 management target."
Shares of Deere closed at $84.05 yesterday.
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