Deere & Company (NYSE:DE), a prominent manufacturer of agricultural and construction machinery, experienced a 4% drop in its stock value by Thursday morning. This decrease comes on the heels of an analyst downgrade and a continual decline in key crop prices such as corn, wheat, and soybeans.
Earlier this week, David Raso, an analyst at Evercore ISO, revised his price target for Deere & Company from $456 to $424 and downgraded the stock from outperform to in-line. The new in-line rating implies that the stock may not outperform the market or its sector, potentially dissuading investors from taking on the additional risk associated with holding Deere's stock. Raso's downgrade was primarily influenced by concerns over slowing production levels in South America which could lead to reduced sales volumes in crucial markets like Brazil.
In parallel to the downgrade, significant reductions were observed in the prices of corn, wheat, and soybeans over the past week. Corn prices decreased by 1.4%, wheat fell by 2.2%, and soybeans dropped by 4.3%. Wheat prices have reached a yearly low, while corn and soybean prices are approaching their lowest levels for the year.
The weakening outlook in South America was previously reflected in Deere's stock price. During their third-quarter earnings call back in August 2023, company management adjusted its full-year growth forecast for the ag and turf industry in South America (tractors and combines) from flat to a potential decrease of up to 5%.
This ongoing fall in crop prices raises further concerns for Deere & Company. As farmers' spending on equipment often correlates with their crop income, led by crop prices, consistent decreases may suggest a cyclical peak in Deere's revenue and earnings.
Despite these challenges, Deere & Company did not make it to the list of ten stocks recommended for purchase by an analyst team known for tripling the market with their newsletter, Motley Fool Stock Advisor, over the past decade.
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