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On Friday, Raymond (NSE:RYMD) James updated its outlook for Deere & Company (NYSE:DE), increasing the price target from $530 to $560 while maintaining an Outperform rating. The adjustment follows Deere’s second-quarter operating results, which surpassed expectations. Analysts at Raymond James noted the company’s resilience in the face of approximately $400 million in tariff-related costs expected in the second half of the year.
The firm highlighted Deere’s largest segment, Production & Precision Agriculture (PP&A), for its minimal direct impact from tariffs, attributing this to Deere’s highly integrated model and sourcing strategy. This, they believe, strengthens Deere’s competitive position in North America. Despite the introduction of new tariff-related costs, Raymond James anticipates the PP&A margin guidance for the latter half of 2025 might be overly cautious and that the mid-teens margin run-rate may not be a realistic baseline for fiscal year 2026.
Raymond James has adjusted its fiscal year 2025 earnings per share (EPS) estimate for Deere down to $19.25, taking into account the strong second-quarter performance offset by lower margin assumptions for the second half of the year. InvestingPro data reveals that 8 analysts have revised their earnings downward for the upcoming period, with current consensus forecasting a sales decline. For deeper insights into Deere’s financial outlook and access to comprehensive analyst coverage, investors can explore the detailed Pro Research Report available on InvestingPro. However, the firm projects an increase in EPS to $21.80 for fiscal year 2026, supported by expected year-over-year volume growth across all of Deere’s operating segments.
The firm also expressed optimism regarding the recovery prospects for the agricultural segments, citing tightening global grain supply/demand balances and rising commodity prices as key factors for improving farmer sentiment and profitability. As a prominent player in the Machinery industry, Deere maintains strong financial health with a current ratio of 2.11 and has consistently paid dividends for 55 consecutive years, demonstrating remarkable stability. InvestingPro subscribers can access over 30 additional financial metrics and insights about Deere’s market position and growth potential. They forecast that Brazil and Western Europe are likely to lead recovery ahead of North America. Additionally, Raymond James noted the importance of progress in used equipment markets in North America and positive pricing in the large agriculture segment despite challenges in the industry.
Potential legislative changes were also mentioned, with Raymond James suggesting that the proposed House tax bill, if passed, could offer several benefits to the agricultural equipment sector, including full bonus depreciation, increased Section 179 limitations, and enhanced prospects for the 45z tax credit.
In other recent news, Deere & Company reported impressive financial results for the second quarter of 2025, surpassing market expectations with an earnings per share (EPS) of $6.64, beating the forecasted $5.56. The company’s revenue also exceeded projections, reaching $12.76 billion against a forecast of $10.98 billion. Despite this strong performance, Deere revised its net income forecast for FY2025 downward by $125 million, citing tariffs as a significant headwind with a projected $500 million impact for the fiscal year. Truist Securities responded to these developments by raising its price target for Deere stock to $619, maintaining a Buy rating, indicating continued confidence in the company’s prospects.
The company’s Production & Precision Ag (PPA) and Small Ag & Turf (SAT) segments showed strong sales and margin performance, although the Construction & Forestry (C&F) segment did not meet sales and profitability expectations. Deere’s order book for PPA is full through October, providing clear visibility through the fiscal year’s end, which could support earnings growth into FY2026. Additionally, Deere has initiated early order programs for sprayers and plans to start its planter program in June, with considerations for a 2-4% price increase for PPA products in 2026.
Analyst Jamie Cook from Truist Securities noted that current data points suggest 2025 might be the low point of the current cycle, with stabilized crop prices in North America and positive developments in Brazil and Europe. Deere’s strategic focus on precision agriculture technologies and cost management has helped mitigate the impact of declining sales in its core segments, maintaining strong margins despite market challenges.
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