Deere Hits All-Time Highs; Wells Fargo Thinks It Can Go Higher

Shares of Deere & Company DE shot to $102 from $92, reaching a new 52-week high after a shocking Q4 report. The company more than doubled the Street’s expected EPS, topping sales estimates as well.

Even with sales expected to decrease slightly in Q1 2017 following the trend of a cyclical downturn, the company has “more earnings power to come,” said Wells Fargo analyst Andrew Casey in a report published Friday. The analyst increased his 12–18-month valuation range to $120–$123 from $100–$103.

“While the stock recalibrated to the good news, we expect further upside potential especially given we do not expect the stock has fully discounted mid-cycle earnings potential before end markets have bottomed,” said Casey.

Cyclical Downturn Bottoming Out

“We view DE’s performance over the last few quarters,” said Casey, “and guidance, to suggest that internal return and cash flow generation ability have meaningfully improved in this cyclical downturn compared to prior down cycles.”

The three-year downturn in farm equipment sales expected to bottom out in 2017, according to the analyst.

Wells Fargo has an Outperform rating on Deere shares.

At last check, Deere was up 1.78 percent at $103.99.