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Deere & Company, the world’s largest makers of farm equipment, forecasts net income to be about $2.25 billion for the full year after the company reported net income of $811 million, or $2.57 per share for the third quarter, sending its shares up over 6% to a record high of $202.81.
However, many uncertainties remain regarding the effects of the global COVID-19 pandemic that could negatively affect the company’s results and financial position in the future.
Agricultural, construction and forestry equipment manufacturer said for the first nine months of the year, net income attributable to Deere & Company was $1.993 billion, or $6.30 per share, compared with $2.532 billion, or $7.87 per share, for the same period last year. Quarterly profit came in at $2.57 per share and equipment sales fell 12.4% on a year-on-year basis.
Deere said its worldwide net sales and revenues decreased 11%, to $8.9 billion, for the third quarter of 2020 and declined 12%, to $25.8 billion, for nine months. Net sales of the equipment operations were $7.9 billion for the quarter and $22.6 billion for nine months, compared with $8.9 billion and $26.2 billion last year.
“We believe DE’s 3Q is beginning to show the potential around the margin improvement program, aimed at driving 15% mid-cycle segment margins. We raise our numbers for FY21-23 but still only get to 13.8% segment margin by FY23. Achieving the 15% target by FY22 would add nearly $2.00 to our above-consensus estimate. A more robust replacement cycle could provide further upside,” said Stephen Volkmann, equity analyst at Jefferies.
Deere’s shares closed 4.39% higher at $199.50 on Friday. However, the stock gained 43% since late May and up over 15% so far this year.
Deere stock forecast
Fourteen analysts forecast the average price in 12 months at $189.38 with a high forecast of $235.00 and a low forecast of $154.00. The average price target represents a -5.07% decrease from the last price of $199.50. From those 14 analysts, nine rated “Buy”, four rated “Hold” and one rated “Sell”, according to Tipranks.
Morgan Stanley target price is $181 with a high of $281 under a bull scenario and $63 under the worst-case scenario. Jefferies raised the price target to $230 from $200.
Other equity analysts also recently updated their stock outlook. Deere & Company had its price target increased by Goldman Sachs Group to $209 from $182. Deutsche Bank cut from a buy rating to a hold rating and set a $185.00 price objective for the company. BMO Capital Markets boosted their price target on Deere & Company from $150.00 to $235.00 and gave the stock an outperform rating in a report on Monday.