BUY OR SELL-Will crop of forecast cuts hurt Deere?

* Deere shares up despite repeated profit forecast cuts

* Bulls say food, biofuel needs support company

* Bears worry about declining farm incomes, tight credit

By James B. Kelleher

CHICAGO, May 22 (Reuters) - A funny thing happened when
Deere & Co (DE.N), the world's largest maker of farm equipment,
slashed its full-year earnings forecast this week -- for the
second time in six months.

Almost nothing.

The analysts who cover the company all left their
respective "buy," "hold" and "sell" recommendations unchanged;
a handful actually took the opportunity to raise their 12-month
price targets on Deere shares.

All this despite a warning from the Moline, Illinois-based
company that it might very well miss its new, lowered full-year
profit forecast. "Markets remain extremely uncertain," Susan
Karlix, manager of Deere's investor communications, said during
a conference call with analysts, "which makes it difficult to
project sales and earnings with a high degree of competence."

Among the headwinds? Accelerating weakness in the company's
construction and forestry business for starters, virtually
nonexistent credit in emerging markets and declining farm
income this year and next in the United States, a market Deere
dominates.

Since ag equipment sales and farm income are highly
correlated, that is not good news for sales of the tractors,
harvesters and sprayers Deere is best known for.

Yet most analysts shrugged off the company's warning, with
many insisting their long-term bullish thesis on the stock was
unchanged by the short-term challenges Deere faces.

Should investors be as sanguine?

BULLS

Those who are bullish on Deere cite both immediate issues,
like management's execution through this downturn and signs of
firming crop prices, as well as longer-term trends, like rising
food consumption in the developing world and the push for
biofuels.

"Despite the reduction in near-term earnings outlook, we
continue to view Deere as well-positioned to address the solid
long-term secular growth drivers, including changing dietary
trends in emerging markets, continued support from ethanol and
increased mechanization," said Barclays Capital analyst Meredith
Taylor, who rates the shares "overweight" and raised her
12-month price target to $50 from $44 this week.

BEARS

Not everyone is so upbeat on Deere. Jerry Revich, an
analyst at Goldman Sachs, has a "sell" on the company. He says
he expects "ag equipment to lag in the early stages of the
economic recovery due to declining 2009 farmer income, young
developed market tractor fleets, and the more discretionary
nature of ag capex."

Revich also notes the sharp drop in profitability at
Deere's construction and forestry division, which saw sales
fall 55 percent in the most recent quarter and posted a $75
million operating loss. Those kinds of negative operating
margins are "similar," Revich says, to those at Terex Corp
(TEX.N) and CNH Global NV (CNH.N), neither of which trades as
close to its 52-week high as Deere does.

This, combined with his conviction that mining equipment
stocks are better-positioned than Deere to perk up when
commodity prices recover, leave Revich convinced Deere is
"slightly overvalued." Investors interested in playing the
equipment angle of any possible recovery in commodity prices are
better advised, he says, to own Joy Global Inc (JOYG.O) and
Bucyrus International Inc (BUCY.O).
(Reporting by James B. Kelleher, editing by Matthew Lewis)