Analyst Note| Dawit Woldemariam |
After taking a fresh look at Deere, we’ve increased our fair value estimate to $236 per share from $194 to reflect stronger end-market performance. In agriculture, we think crop demand will be strong in the near term, mainly due to robust demand from China and tight global supply. We also expect strong replacement demand for large agriculture equipment, as farmers look to refresh their machine fleet. In construction, we think increased infrastructure spending in the U.S. will be a tailwind for Deere. There is significant pent-up road construction demand, with many urban roads in relatively poor condition. U.S. legislation is likely in the near term, as both sides of the political aisle have presented plans.