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Deere (DE +2.5%) runs higher as Wells Fargo Starts coverage with an “Overweight” ratingAnd a $455 price goal, evenAfter the stock’s 14% increase over the past 2 weeks in conjunction with crop price, in an environment “healthy farm fundamentals”, elevated fleet age, and adoption of new tech supporting high HP equipment demand.”
Seth Weber, Wells Fargo’s Machine Coverage Manager, sees Deere “continuing its distance from the rest of Machinery coverage with respect to adopting secular tailwinds around Technology and Sustainability” and that the company’s “evolving Model…should support higher margins and more recurring revenue and make it less dependent on machine sale.”
Weber also launches Caterpillar (CAT). +1.8%) at Equal Weight with a $231 PT, saying the company has “made good progress, but we still see the narrative largely tied to the cycle, with industry supply chain and price/cost dynamics likely to temper its ability to fully leverage current strength.”
Wells Fargo also recommends United Rentals as a machine rental company. (URI +0.5%)Herc Holdings (HRI +0.7%)H&E Equipment Services (HEES +1.2%)According to the report, rentals are more profitable than the original equipment makers and the S&P in the initial stages of a demand upcycle.
Jefferies recently upgraded Caterpillar’s stock to Buy, stating that it has historically been a strong hedge against commodity inflation and general inflation.