Deere and CNH Industrial Stocks Jump on Evercore ISI Upgrade

Shares of Deere & Company (NYSE:DE) and CNH Industrial NV (NYSE:CNH) rallied sharply on Thursday after an analyst upgrade from Evercore ISI. The firm boosted its rating on both machinery manufacturers, citing a favorable setup for a cyclical recovery driven by an aging U.S. equipment fleet and supportive crop prices.

The Upgrade

Evercore ISI analyst David Raso upgraded both Deere and CNH Industrial to Outperform from a previous In-Line rating. The firm also significantly raised its price targets, lifting Deere to $813 from $632 and CNH to $18 from $12.50.

The market responded positively to the news. Deere shares closed up 3.3%, while CNH shares surged 10% in Thursday's trading session.

Rationale for Recovery

Evercore's investment thesis is built on several key factors that suggest the agricultural equipment sector may have established a foundation for recovery. The analyst's note highlighted:

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• An aged and smaller U.S. fleet of high-horsepower agricultural equipment following a three-year downturn.
• Reduced channel inventory, creating more room for new sales to farmers.
• Improving precision agriculture technology, which acts as a catalyst for new purchases.

The firm believes that current crop prices, even if they decline slightly, are sufficient to enable U.S. farm equipment purchases to return to replacement demand levels by 2027 for the first time in years.

Forward-Looking Projections

The upgrade is backed by robust long-term earnings projections. Evercore forecasts 2027 earnings per share (EPS) of $26.50 for Deere and $0.82 for CNH. The firm's estimates for 2028 rise to $33.05 for Deere and $1.15 for CNH.

These projections assume a significant rebound in U.S. sales, with industry growth of 37% for combine harvesters and 27% for high-horsepower tractors. Raso noted that his base model includes very little contribution from below-cycle markets in Brazil and Europe. Even with recent stock gains, the analyst suggested that history indicates the companies may only be about one-fifth of the way through a traditional trough-to-peak stock appreciation cycle.