The Moline, IL-based equipment operations company should have lower pension expenses, Barclays said.
The firm raised its 2016 earnings estimate for Deere to $3.65 per share from $3.50 per share.
Deere will likely face several years of lower sales, the firm added.
"Most of the peak tractors sold in 2011-2014 have not yet traded into the used market and we believe the sharply elevated leasing in the used market indicates the used buyer is already balking at the prospect of owning more/newer equipment," Barclays said.
Shares of Deere were up 0.09% to $79.17 in pre-market trading on Monday.
Separately, TheStreet Ratings team rates DEERE & CO as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
We rate DEERE & CO (DE) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. At the same time, however, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and generally higher debt management risk.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- DE, with its decline in revenue, slightly underperformed the industry average of 21.6%. Since the same quarter one year prior, revenues fell by 25.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Machinery industry and the overall market, DEERE & CO's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- Net operating cash flow has decreased to $2,548.50 million or 10.38% when compared to the same quarter last year. Despite a decrease in cash flow of 10.38%, DEERE & CO is in line with the industry average cash flow growth rate of -18.67%.
- The debt-to-equity ratio is very high at 5.46 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- The gross profit margin for DEERE & CO is currently lower than what is desirable, coming in at 31.21%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.22% trails that of the industry average.
- You can view the full analysis from the report here: DE
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.