NEW YORK (TheStreet) -- Deutsche Bank has initiated coverage of Deere & Co. (DE) with a "buy" rating and $110 price target. The investment firm said fundamentals are improving in international agriculture and construction markets.
Projections of a slowdown in Deere's domestic agricultural markets recently weighed on its recent quarterly earnings.
Shares are trading flat at $84.30 before the bell Thursday.
Must Read: Farm Slowdown Fears Weigh on Deere & Co.
TheStreet Ratings team rates DEERE & CO as a Buy with a ratings score of A-. The team has this to say about their recommendation:
"We rate DEERE & CO (DE) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, increase in net income, growth in earnings per share and notable return on equity. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 17.4%. Since the same quarter one year prior, revenues slightly increased by 3.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has increased to -$746.20 million or 40.27% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 22.11%.
- The net income growth from the same quarter one year ago has exceeded that of the Machinery industry average, but is less than that of the S&P 500. The net income increased by 4.8% when compared to the same quarter one year prior, going from $649.70 million to $681.10 million.
- DEERE & CO has improved earnings per share by 9.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, DEERE & CO increased its bottom line by earning $9.08 versus $7.64 in the prior year. For the next year, the market is expecting a contraction of 6.4% in earnings ($8.50 versus $9.08).
- 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. Compared to other companies in the Machinery industry and the overall market, DEERE & CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: DE Ratings Report