Wells Fargo Gets Less Bullish on Deere & Co; Rating, Target Lowered (DE)

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Farming and construction equipment maker Deere & Company ( DE ) on Thursday caught a big downgrade from analysts at Wells Fargo.

The firm said it cut its rating on DE from "Outperform" to "Market Perform" while lowering its price target range from $93-96 to $90-$93. That new range suggests a 7% to 10% upside to the stock's Wednesday closing price of $84.28.

A Wells Fargo analyst commented, "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)."

Continuing, "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."

Deere shares posted small losses in premarket trading Thursday.

The Bottom Line
Shares of Deere & Co. ( DE ) have a 1.95% dividend yield, based on last night's closing stock price of $84.28. The stock has technical support in the $80 price area. If the shares can firm up, we see overhead resistance around the $90-$95 price levels.

Deere & Company ( DE ) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.2 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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Referenced Stocks: CF , DE

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