Bernstein on Deere (DE): Why Brazil Represents an Attractive Opportunity

Bernstein SocGen Group analyst Chad Dillard reiterated a Market Perform rating and $548.00 price target on Deere (NYSE: DE).

The analyst commented: "DE hosted an Investor Day this afternoon focusing solely on its opportunity in Brazil, where DE expects to drive above-market growth for a market with N. America-like margins. It also introduced targets to grow connected machines 2.5x, grow engaged acres by 50%, and highly engaged acres by 150% by 2030. Here’s why Brazil represents an attractive opportunity:

Brazil is set to be the world’s source for incremental corn and soybean supply. Corn and soybeans represent ~90% of Brazil’s grain production, and their consumption is expected to grow at 13-14% CAGRs globally through ‘34 due to favorable domestic policy (for ethanol and biodiesel) and growing exports. Higher production will come from expanding farm land to ~50M acres worth of underutilized areas, but also its two growing seasons due to favorable weather. Farmers’ biggest challenge is to execute re-plant during tight windows, exacerbated by 1) operational complexity (farmers lose 1% yield/day for every day the second crop is planted late, and requires significantly more spraying passes annually) and 2) insufficient real-time digital connectivity (70% of Brazil lacks reliable cell coverage), each of which are alleviated with DE solutions (in this case, See & Spray and JDLink Boost).

Behind 25 years worth of investment, a strong dealer network, and a deep product portfolio, DE has a clear path to win."

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 $515.82 yesterday.

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