Al Root

Deere stock rose early Friday after catching an upgrade to Buy.

Melius Research analyst Rob Wertheimer upgraded shares of the farm equipment maker to Buy from Hold. His price target went to $750 from a recent $434. The $750 mark is the highest on the Street, up 47% from Thursday's closing level.

Deere stock was up 0.8% at $515 in premarket trading, while S&P 500 and Dow Jones Industrial Average futures were up 0.3% and 0.2%, respectively.

Wertheimer believes that Deere's equipment and precision-agriculture technology will deliver "transformational value" to farmers. Precision agriculture refers to technology such as self-driving tractors, improved planting and spraying techniques, and better soil monitoring, among other things. All of those can help farmers grow more while spending less money.

For Deere, precision-ag technology offers the benefit of being upgradable through software on equipment, generating recurring revenues. Deere aims to generate 10% of sales from recurring revenue, excluding parts and services that recur, by the end of the decade, up from a couple of percent today.

Higher levels of recurring sales should result in a higher valuation multiple, too, Melius notes. While Deere is a maker of heavy-duty equipment whose sales rise and falling depending on the state of farm income and commodity prices, investors typically don't pay up for cyclical earnings.

The shares have traded at an average of about 17 times estimated earnings over the past decade. The S&P 500 traded for closer to 20 times.

With the upgrade, 42% of analysts covering the stock rate shares Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target is about $533 a share.

Coming into Friday trading, shares were up about 38% over the past 12 months.

Deere sales are expected to be about $38 billion in fiscal year 2025, down from $45 billion in fiscal year 2024 as declining farm incomes and lower commodity prices pressure its sales. That is expected to turn around, though.

Wall Street projects about $41 billion and $46 billion in sales for fiscal years 2026 and 2027, respectively.

Write to Al Root at allen.root@dowjones.com

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June 06, 2025 08:37 ET (12:37 GMT)

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