Jefferies Downgrades Deere (DE) on High Valuation

Jefferies Downgrades Deere Citing Valuation Concerns

Investment firm Jefferies has downgraded Deere & Co (DE) to an "Underperform" rating, stating that the company's current stock valuation already factors in a full recovery in the agricultural cycle. The revision led to a decline of over 1% in Deere's shares during premarket trading.

Valuation and Market Performance

According to Jefferies, Deere's stock is trading at approximately 35 times earnings, which is significantly higher than its prior peak averages of around 23 times. The firm highlights that this elevated valuation comes at a time when U.S. farmer incomes are continuing to decline. The stock has demonstrated strong recent performance, more than doubling from its 2022 cycle low and increasing by about 40% in the last seven weeks alone.

Impact on Deere Stock

The immediate market reaction to the downgrade was negative, with Deere's shares dropping in premarket trading. The analysis suggests that the current stock price may be overextended relative to the underlying fundamentals of the farm economy, posing a potential risk for investors.

Outlook Summary

Jefferies' downgrade implies that Deere's stock may face headwinds as its valuation appears disconnected from the current economic reality of the agricultural sector. Investors will likely monitor farmer income trends and equipment demand to gauge whether the market's optimism is justified.

FAQ

Q: Why did Jefferies downgrade Deere & Co?
A: Jefferies downgraded Deere to "Underperform" because its stock valuation is considered too high, reflecting a full farm cycle recovery that has not yet occurred amid declining farmer incomes.

Q: What was the immediate impact on Deere's stock?
A: Deere & Co shares fell by more than 1% in premarket trading following the downgrade announcement.

Source: Investing.com