Deere shares fall the most in 14 weeks on Wednesday after tractor maker revises down fiscal 2020 profit forecast

November 28, 2019 11:05 am

Deere & Co’s fourth-quarter profit, reported on Wednesday, registered an 8.96% year-on-year drop, as trade frictions and poor weather in the US farm belt weighed on results.

Deere shares closed lower for the fifth time in the past ten trading sessions in New York on Wednesday. It has also been the steepest daily loss since August 23rd. The stock went down 4.30% ($7.59) to $169.06, after touching an intraday low at $167.05, or a price level not seen since October 10th ($166.03).

Shares of Deere & Co have risen 13.33% so far in 2019 compared with a 25.80% gain for the benchmark index, S&P 500 (SPX).

In 2018, Deere’s stock went down 4.69%, thus, it outperformed the S&P 500, which registered a 6.24% loss.

Deere’s global net sales went up 5% year-on-year to $9.9 billion during the fiscal fourth quarter as agriculture & turf equipment sales rose 3%, while construction & forestry equipment sales surged 8% year-on-year.

Adjusted net income attributable to shareholders decreased to $681 million ($2.14 per share) during the fourth quarter ended on November 3rd from $748 million ($2.30 per share) in the year-ago period. Analysts on average had expected earnings of $2.13 per share.

“Lingering trade tensions coupled with a year of difficult growing and harvesting conditions have caused many farmers to become cautious about making major investments in new equipment,” John May, Deere’s Chief Executive Officer, said in a statement.

The company now forecasts net income for fiscal year 2020 within the range of $2.7 billion to $3.1 billion, a revision down compared to a prior forecast of $3.2 billion.

Deere also projects a 5% to 10% drop in international sales of agriculture and turf equipment during fiscal year 2020 and a 10% to 15% slump in construction and forestry equipment sales.

Analyst stock price forecast and recommendation

According to CNN Money, the 18 analysts, offering 12-month forecasts regarding Deere & Co’s stock price, have a median target of $178.50, with a high estimate of $233.00 and a low estimate of $140.00. The median estimate represents a 5.58% upside compared to the closing price of $169.06 on November 27th.

The same media also reported that at least 9 out of 20 surveyed investment analysts had rated Deere & Co’s stock as “Buy”, while 7 – as “Hold”. On the other hand, 1 analyst had recommended selling the stock.

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