Wells Fargo Downgrades Deere (DE) to Market Perform; Farm CF Outlook Concern

February 16, 2012 7:32 AM EST
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Price: $105.24 +0.86%

Rating Summary:
    9 Buy, 11 Hold, 7 Sell

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    Up: 5 | Down: 5 | New: 0
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Wells Fargo downgraded Deere (NYSE: DE) from Outperform to Market Perform, price target range cut from $93-96 to $90-$93.

Wells analyst says, "We are downgrading shares due to an expectation that investor concern about peaking earnings power that potentially causes the stock valuation multiple to compress and offset potential positive earnings surprises. Given forecasts for a modest row crop farmer cash flow (CF) decrease over the next year against elevated US and Canadian large farm equipment demand, we believe the stock will likely be challenged to outperform until investors have (1) more visibility on FY2013 demand potential that is currently clouded due to farm cash flow concerns and (2) a better understanding of the normalized earnings impact from FY2013 incremental developing market production capacity increases (i.e., seven new facilities starting production causing a step function in revenue growth likely realized during FY2014)."

"After the company guided FY2012 above consensus (i.e., to approximately $8.05), we are increasing our FY2012E EPS to $8.10 from $7.90 ($0.10 from FQ1 2012 beat, $0.02 FQ2 2012E to $2.44 from $2.42, and $0.08 from higher FH2 2012E) and maintaining our FY2013E EPS of $8.65."

For an analyst ratings summary and ratings history on Deere click here. For more ratings news on Deere click here.

Shares of Deere closed at $84.28 yesterday.

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