Deere Likely To Benefit From A Bottoming In Demand After 3 Years Of Declines

Deere & Company DE reported some relatively weak September sales numbers, but Wells Fargo analyst Andrew Casey believes the stock is still a solid buy ahead of a coming cyclical upswing in global demand.

Deere’s September U.S./Canada sales fell short of its industry peers in almost every single category. The company reported positive single-digit year-over-year 40 horsepower (HP) tractor sales growth, negative double-digit year-over-year 40-100 HP tractor sales growth and 9 percent year-over-year 100-plus HP tractor sales growth. In addition, 4WD tractor sales and combine sales were also down double-digits year-over-year and fell well short of the industry average.

While North American numbers came up short in September, European numbers for Deere were mixed. Tractor sales fell double digits year-over-year, but combine sales grew double-digits. Both numbers were down double-digits in August.

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Casey notes September construction and forestry equipment sales were mixed as well, but he is much more optimistic looking ahead.

“We believe the company will benefit from an anticipated bottoming in global farm equipment demand after almost three years of synchronized demand decline,” Casey explains.

He adds that Wells Fargo is anticipating international demand will play a big role in the medium term.

Wells Fargo maintains an Outperform rating on Deere and values the stock at between $100-103.