What Analysts Are Saying About Deere After Its Earnings Win

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Deere & Co. (NYSE: DE) reported second-quarter fiscal 2017 results before markets opened Friday. The stock saw a nice pop following the release, and analysts took it upon themselves to raise their targets in response to the results.

24/7 Wall St. has included some brief highlights from the earnings report, as well as what analysts are saying afterward.

The farm and heavy equipment maker posted diluted earnings per share (EPS) of $2.49 on revenue of $8.29 billion, compared with consensus estimates for EPS of $1.68 and revenue of $7.31 billion. In the same period of last year, the company reported adjusted EPS of $1.56 on revenue of $7.88 billion.

For the fiscal year 2017, Deere now expects equipment sales to increase by about 9% and third-quarter sales to rise by about 18%. The full-year estimate is more than double the company’s 4% estimate for growth made when it reported first-quarter results in February. Net sales and revenues are projected to increase about 9% for fiscal 2017 with net income attributable to Deere of about $2 billion.

Analysts have forecast fiscal year sales of $24.32 billion, about 5% higher than sales of $23.39 billion in 2016. For the year, analysts expect EPS of $4.94 compared with $4.81 last year.

For the third quarter, analysts are looking for EPS of $1.53 and revenues of $6.3 billion. Based on what Deere said this morning about its own third-quarter estimates, expect these numbers to rise in the next few days.

Credit Suisse maintained its Buy rating and raised its price target to $151 from $132. The firm gave its “Blue Sky Scenario” as follows:

Our Blue Sky scenario assumes mid-cycle sales reach ~$33B while operating margins expand to ~14% helped by a recovery in Ag. Our Blue Sky target price of $154 is derived by applying a multiple of 15x on our next mid-cycle peak EPS estimate of $11.28, discounted back…. Our Grey Sky Scenario (US$) (from 89.00) 91.00 Our Grey Sky scenario assumes mid-cycle sales reach only $29B while operating margins expand to only 10% driven by a more muted Ag. recovery. Our Grey Sky target price of $91 is derived by applying a multiple of 15x on our next mid-cycle peak EPS estimate of $6.69, discounted back.

S&P CFRA commented on Deere in its report:

We raise our 12-month target price to $130 from $115, 22.6X our FY 17 (Oct.) EPS estimate of $5.75 (raised today from $4.61), above peers and DE’s 5-year average, to reflect an improving outlook for farm and construction equipment. We also raise our FY 18 EPS estimate to $5.63 from $5.34. Deere April quarter EPS of $2.53 vs. $1.56 beat our $1.49 estimate. Revenues were about in line with our expectations, but operating margins were sharply better on mix and pricing. While outlook has improved, we see the premium valuation restricting upside to the shares over the next year.

A few other analysts weighed in on Deere as well:

  • Merrill Lynch reiterated a Buy rating with a $130 price objective.
  • Barclays has an Underweight rating and raised its price target to $90 from $82.
  • Piper Jaffray has a Neutral rating and raised its price target to $113 from $106.
  • Stifel raised its price target from $126 to $135.
  • Deutsche Bank maintained a Hold rating and raised its price target to $135 from $122.
  • UBS has a Neutral rating with a $122 price target.

Shares of Deere were trading down 0.6% at $120.23 on Monday, with a consensus analyst price target of $112.72 and a 52-week trading range of $76.73 to $122.50.