Deere & Co. (DE) Stock Downgraded by Analysts

NEW YORK (TheStreet) -- Deere & Co. (DE) stock was downgraded today by analysts at Robert W. Baird to "neutral" from "outperform" and the price target was lowered to $98 from $102.

The action comes after the manufacture of agricultural machinery posted its second quarter results last Friday. The company reported revenue of $8.17 billion, or $2.03 earnings per share, compared to revenue of $9.25 billion, or $2.65 earnings per share.

Overall, the company's quarterly revenue dropped 20% from the same period last year.

Lower sales of agriculture and turf were recorded in all regions of the world, but the decrease was primarily due to lower shipment volumes of large agricultural equipment in the U.S. and Canada, the company said.

Analysts believe 2016 will be another difficult year in terms of demand for farm equipment. Also, with corn prices likely to face seasonal under pressure, the stock might see some negative sentiment through the summer, they highlighted.

In Tuesday's morning trading, shares of Deere & Co. are gaining 0.8% to $94.10.

TheStreet Ratings team rates DEERE & CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate DEERE & CO (DE) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and notable return on equity. We feel its strengths outweigh the fact that the company has had somewhat weak growth in earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has increased to -$510.10 million or 31.64% when compared to the same quarter last year. In addition, DEERE & CO has also vastly surpassed the industry average cash flow growth rate of -31.43%.
  • DE, with its decline in revenue, slightly underperformed the industry average of 10.5%. Since the same quarter one year prior, revenues fell by 16.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. 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.
  • In its most recent trading session, DE has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
  • DEERE & CO's earnings per share declined by 38.1% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, DEERE & CO reported lower earnings of $8.62 versus $9.08 in the prior year. For the next year, the market is expecting a contraction of 37.9% in earnings ($5.35 versus $8.62).
  • You can view the full analysis from the report here: DE Ratings Report

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