Wednesday, August 13, 2008

Deere (NYSE:DE): Reits Overweight and $105 tgt - Morgan Stanley

Morgan Stanley reits OW on Deere (NYSE:DE) with a $105 tgt noting 3Q08 results and
guidance may disappoint the market somewhat, but are not a huge surprise given materials costs that have spiked since Deere’s May 14 guidance. Deere’s 2008 net income outlook was lowered to $2.13 billion from $2.20, an effective decline of 14% for 4Q guidance. They don’t see anything structurally wrong, they simply think materials costs are higher than expected.

Deere could easily have raised prices more in 2008 to deal with materials costs, in firm's view,
and the weak pricing vs materials is simply not an indicator of structural pricing weakness. They see no immediate need to adjust 2009 estimates.

Notablecalls: I think DE represents a good play here @ $62 (10x FY09 EPS)

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