Shares of Deere & Co. (DE -3.84%) fell as much as 3.9% this morning as investor sentiment took a double blow. An analyst downgraded the agricultural machinery stock, citing valuation concerns, even as President Donald Trump announced tariffs on "external" agricultural products effective April 2. China has already announced retaliatory tariffs in response.
Trump's tariffs are a new threat to Deere
Analysts at R. W. Baird downgraded their rating on Deere stock from outperform to neutral while keeping the price target at $501 per share. That means only an 8% upside from the stock's Monday closing price.
Baird's analyst is optimistic about Deere's inventory management and expects its earnings to grow in 2026, but still sees limited upside potential in the stock given its recent rebound. The firm also downgraded peer stocks amid a looming uncertainty in the agricultural sector, given the weak commodity prices, geopolitical concerns, and potential challenges from tariffs.
NYSE: DE
Key Data Points
Meanwhile, President Trump announced that the U.S. would impose tariffs on external agricultural products on April 2 to boost the domestic agriculture industry. With Trump already imposing sweeping tariffs on imports from Mexico, Canada, and China, Beijing quickly retaliated and announced tariffs on several imported goods from the U.S. on March 3, including a wide basket of food and agricultural products. China was the largest importer of agricultural products from the U.S. in fiscal 2023, followed by Mexico and Canada, according to data from the U.S. Department of Agriculture.
Deere stock could feel pressure in the short term
Deere is the world's largest agricultural equipment company, and 34% of its total sales and revenue originated outside the U.S. and Canada in 2024. Although Deere tried to dispel fears during its latest earnings conference call by saying it's a "net exporter" of agricultural and turf equipment from the U.S., tariffs could further slow down the company's growth.
Deere recently reported a 30% year-over-year drop in sales and a 50% drop in net income for the first quarter amid a challenging business environment. The agricultural giant reiterated its outlook of $5 billion to $5.5 billion for net income in 2025, but that would still be a drop of almost 22% over 2024 even at the highest end of its guidance range. With more tariffs and retaliatory moves in the air, it remains to be seen whether Deere will be able to meet its guidance this year.
