Deere & Company shares continue to trade in a bull market but the correction could be around the corner

Deere & Company (NYSE: DE) shares continue to trade in a bull market, and with a $95B market capitalization, this Company is reasonably valued. Oppenheimer upgraded its price target on Deere & Company to $296, while Morgan Stanley sees Deere as one of the best agriculture machinery stocks.

Fundamental analysis: Deere expects agriculture equipment sales to climb 10%-15% for fiscal 2021

Deere & Company manufactures various equipment worldwide and operates through three segments: agriculture and turf, construction and forestry, and financial services. Deere & Company has its headquarters in Moline, Illinois, and the Company’s slogan is “Nothing Runs Like a Deere.”

Deere shares have been moving in an uptrend last several months, and the Company’s business has proven stability throughout the Covid-19 pandemic. Deere & Company reported Q4 results in November; net equipment sales have decreased only 0.6% Y/Y to $8.66B while Q4 GAAP EPS was $2.39 (beats by $1.05).

Worldwide net sales have decreased 2% Y/Y to $9.731B, mainly to the coronavirus crisis, but the Company expects agriculture equipment sales to climb 10%-15% for fiscal 2021. It is also important to say that the net income forecast for fiscal 2021 stays around $4B, compared to guidance issued in May of between $1.6B-$2B.

“Higher crop prices and improved fundamentals are leading to renewed optimism in the agricultural sector and improving demand for farm equipment. At the same time, we are looking forward to realizing the benefits of our smart industrial operating strategy, which is designed to accelerate the delivery of solutions that will drive improved profitability and sustainability in our customers’ operations,” said CEO John May.

Oppenheimer upgraded its price target on Deere & Company to $296 due to the expectation that the Company is on track to deliver improved mid-cycle margins. “As the leading agriculture equipment OEM, Deere has a scale advantage in defining the agricultural technology landscape,” said analyst Kristen Owen from Oppenheimer.

Positive information is that Morgan Stanley also sees Deere as one of the best agriculture machinery stocks that will deliver strong shareholder value for many years to come. Deere & Company is fairly valued at the current stock price, but maybe it is not the best moment to buy shares because the price could crash if the US stock market enters the correction phase.

Technical analysis: Deere shares remain in the “buy” zone

When we look at the chart below ( one year period), we can see that this stock price has advanced from $106 above $300, and as long the price is above this trend line, this stock remains in the “buy” zone.

The critical support levels are also $280 and $260; $320 and $340 represent the resistance levels. If the price jumps above $320, it would be a signal to trade Deere & Company shares, and the next target could be around $330, but if the price falls below the $280 support level, it would be a firm “sell” signal.

Summary

Deere shares have been moving in an uptrend last several months, and the Company’s business has proven stability throughout the Covid-19 pandemic. Morgan Stanley sees Deere as one of the best agriculture machinery stocks, but maybe it is not the best moment to buy shares because the price could crash if the US stock market enters the correction phase.