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Moody's revises Deere outlook to stable

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Moody's revises Deere outlook to stable

Moody's changed its outlook for Deere & Co., along with its supported captive finance operations, to stable from negative.

The outlook reflects Deere's leading position in the agricultural equipment market and the expectation that its shareholder value added model will continue to support the company's performance through cyclical downturns.

Deere's liquidity is adequate, the rating agency noted, driven by the funding requirements at the captive finance operations.

The stable outlook also reflects expectations of a successful integration of road construction equipment maker Wirtgen Group, which Deere acquired late in 2017.

Meanwhile, Deere's A2 long-term rating, which was affirmed, factors in expectation that the company will maintain its strong market position, with financial performance expected to benefit from improving conditions in agriculture markets.

Moody's added that there is "little likelihood" that it would consider an upgrade for Deere's current A2 rating, citing the "inherent cyclicality" in the company's core markets and a stated capital allocation strategy that targets a "mid-single A rating." On the other hand, the ratings could be downgraded in case, among other factors, the company targets a more aggressive financial strategy, particularly with respect to share repurchases or the maintenance of less-than-adequate liquidity sources.