Shares of Deere & Co. (DE) are down $1.35, or 1.7%, at $80.97, after UBS‘s Steven Fisher this morning cut his rating on the stock to Sell from Neutral, and cut his price target to $72 from $96, writing that the company will “revert to more historical norms relative to corn price performance” as lower corn prices pressure demand for its farm equipment.
Deere’s stock performance — it is down 6% this year so far — has been better than the decline in corn prices, he writes. But that cannot last:
In March of this year, we became more cautious on Deere and we wrote that "corn prices were s.etting up for a sharp correction." Year to date, corn prices have declined 34%, while DE shares have declined 5%. We believe DE shares could weaken further, reverting to historical norms relative to corn prices. We expect lower corn prices to pressure cash receipts, and as a result, we expect ag equipment demand to weaken in 2014. In recent channel checks, farm equipment dealers have begun to express concern regarding 2014.
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