Farming and construction equipment maker Deere & Company (
) on Thursday caught a big downgrade from analysts at Wells
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 (
) 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
The Bottom Line
Shares of Deere & Co. (
) 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 (
) 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