Tariffs, Trade Cloud Short-Term Future For Deere, But RBC Says Plow Ahead

Deere & Company DE tempered its revenue, net income and cash flow outlook for 2019, but RBC Capital Markets said Monday investors should expect the company to keep plowing along and maintained a bullish long-term outlook on the stock.

The Analyst

RBC's Seth Weber maintained an Outperform rating on Deere, but lowered the price target from $190 to $175.

The Thesis

Weber said in a note to investors that Deere’s reset isn’t a big surprise given noise around U.S.-China trade relations, weather challenges and an outbreak of African swine flu in Asia. Those have all put pressure on American farmers and or crop demand, deflating the start to the agriculture industry’s year.

But assuming the environment settles, planned second-half production cuts should position Deere well for 2020, Weber wrote.

RBC trimmed its estimates a bit to reflect the current trade and tariff turmoil and tempered outlook, but otherwise views the Outperform thesis as intact.

Price Action

Investors didn’t seem immediately bothered by the reset, with Deere's stock trading up slightly on Monday to $135.83.

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