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Analyzing Deere’s Newly Added Risk Factors
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Analyzing Deere’s Newly Added Risk Factors

Illinois-based Deere (DE) manufactures heavy machinery used in agriculture, construction, and forestry. It also makes lawn care equipment.

For Fiscal Q4 2021 ended October 31, Deere reported a 16% year-over-year increase in revenue to $11.3 billion, surpassing the consensus estimate of $10.4 billion. It posted earnings of $4.12 per share versus $2.39 in the same quarter last year and beat the consensus estimate of $3.90.

Deere has recently agreed to acquire a majority stake in Kreisel Electric, an Austria-based battery technology provider. It said the investment aligns with its electrification and sustainability goals. Kreisel has developed high-performance battery modules and packs and built a charging infrastructure platform.

Deere ended Q4 with $8.1 billion in cash. It plans to distribute a quarterly dividend of $1.05 per share on February 8 and has set December 30 as the ex-dividend date. Deere stock currently offers a dividend yield of 1.11%.

With this in mind, we used TipRanks to take a look at the newly added risk factors for Deere.

Risk Factors

According to the new TipRanks Risk Factors tool, Deere’s main risk category is Legal and Regulatory, representing 28% of the total 29 risks identified for the stock. Finance & Corporate and Tech & Innovation are the next two major risk categories, accounting for 21% and 17% of the total risks, respectively. Deere recently updated its profile with three new risk factors across the various categories.

The company informs investors that the LIBOR benchmark is being phased out, yet the effect of that change is not currently fully understood. It cautions that failure to properly transition from LIBOR to alternative benchmark rates could adversely affect its operating results and stock price.

Deere tells investors that its products contain connectivity hardware that allows for remote system updates. The company cautions that while it has taken steps to protect its systems from cyberattacks, there have been attempts to gain unauthorized access to its products. Therefore, it cautions that it could suffer a security breach. If a breach occurs, Deere warns that its operating results could be adversely affected and it may suffer reputational damage.

Deere informs investors that its global operation subjects it to a complex regulatory environment. It mentions regulations related to issues such as antitrust practices, money laundering, advertising, labor, and cash repatriation. It says that regulations may vary significantly from market to market and change frequently, making compliance difficult and costly. The company warns that a violation of the regulations could result in sanctions and adversely affect its business, operating results, and financial condition. Furthermore, its reputation may be harmed.

The Legal and Regulatory risk factor’s sector average is 17%, compared to Deere’s 28%. Deere’s stock has gained about 30% since the beginning of 2021.

Analysts’ Take

D.A. Davidson analyst Michael Shlisky recently initiated coverage on Deere stock with a Buy rating and a price target of $400, which suggests 14.04% upside potential.

Consensus among analysts is a Moderate Buy based on 11 Buys, 3 Holds, and 1 Sell. The average Deere price target of $423.29 implies 20.68% upside potential to current levels.

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