Salomon Downgrades Deere to 'In-Line'

Analyst David Raso thinks the key spring selling season could be sluggish

Salomon Smith Barney downgraded Deere & Co. (DE ) to in-line.

Analyst David Raso says farm stocks have been the top sub-sector in machinery for the past year, but the catalyst needed to continue a strong outperformance is not developing, he says. Raso notes that while Deere has beaten its estimates in the past four quarters, continued strong earnings per share surprises are needed to bring fresh money into the stock.

Raso believes a recovery in domestic high horsepower (and higher margin) farm equipment is key to the continued upside, but his recent visits to trade shows and farmer conventions suggest the key spring selling season could be sluggish.

Raso cut the $2.84 earnings per share estimate to $2.39, vs. the $2.10-$2.50 guidance. He also cut his $59 tgt to $47.

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