On Thursday, Truist Securities initiated coverage on shares of Deere & Company (NYSE: NYSE:DE), assigning a Buy rating and setting a price target of $494. The firm's outlook is based on a positive assessment of the farm equipment market's potential through 2025. According to Truist Securities, the general market sentiment towards farm equipment demand for 2025 is overly pessimistic, and they anticipate 2024 to serve as a year of transition where channel inventory levels are expected to stabilize.
Deere is seen to be well-positioned for the following year, as Truist Securities projects the company will align its production with retail demand in 2025. This forecast is supported by several factors including the current high age of farm equipment, stable to healthy farmer incomes, and the anticipated adjustment of dealer inventories by the end of 2024. These elements are expected to create a favorable environment for Deere.
The firm also highlights the role of technological advancements in the agriculture sector. There is an expectation that the continued introduction of new technology features will prompt farmers to update their equipment more frequently. The inability to leverage productivity and cost savings from new precision agriculture features could place farmers at a competitive disadvantage, thus motivating them to invest in newer models.
Additionally, Truist Securities believes that Deere's Construction & Forestry (C&F) segment is likely to experience growth due to several secular trends. These include the impacts of the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA), the reshoring of manufacturing, and increased expenditure on energy transition.
Prior to this new coverage, Deere's stock closed at $372.65. The new price target of $494 suggests a significant potential upside from the previous day's closing price.
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