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Deere To Benefit From Strengthening End Markets, but We Think Shares Are Overvalued

Dawit Woldemariam Equity Analyst

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.

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Company Profile

Business Description

Deere is the world’s leading manufacturer of agricultural equipment, producing some of the most recognizable machines in the heavy machinery industry. The company is divided into four reportable segments: production and precision agriculture, small agriculture and turf, construction and forestry, and John Deere Capital Corporation. Its products are available through a robust dealer network, which includes over 1,900 dealer locations in North America and approximately 3,700 locations globally. John Deere Capital Corporation provides retail financing for machinery to its customers, in addition to wholesale financing for dealers; which increases the likelihood of Deere product sales.

Contact
One John Deere Place
Moline, IL, 61265
T +1 309 765-8000
Sector Industrials
Industry Farm & Heavy Construction Machinery
Most Recent Earnings Jan 31, 2021
Fiscal Year End Nov 1, 2021
Stock Type Cyclical
Employees 69,600

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