Deere Spikes Higher Following Earnings, UBS Still Sees Upside

UBS still sees upside in Deere & Company DE shares despite its 11 percent jump on Wednesday following blow-out third-quarter results on cost cuts.

The brokerage, albeit maintaining its Neutral rating, raised the price target on the shares to $105 from $87, with the revised target implying potential upside of about 3 percent over November 23 close.

“The bottom line is that the primary negatives for Deere stock over the last couple of years (i.e. NA large ag and Finco risk) appear to be neutralizing, and if FY17 is the bottom, then trough earnings would be higher than expected,” analyst Steven Fisher wrote in a note.

Looking Forward

Deere forecasts FY 2017 net income to decline about 8.1 percent to about $1.4 billion (Street/UBSe about $1.2 billion). Fisher said the guidance implies EPS of $4.43, although further buybacks could provide some upside.

Fisher raised his 2017/2018 EPS estimates by 17 percent/18 percent to $4.45/$4.85, respectively.

“We are raising our EPS estimates to reflect reduced cost under-absorption as DE is cutting costs more quickly than initially anticipated,” Fisher highlighted.

At last check, shares of Deere were up 1.82 percent at $104.03.