🚜 John Deere: Deer Or A Gazelle? Part II
🚜 John Deere: Deer Or A Gazelle? Part II
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🚜 John Deere: Deer Or A Gazelle? Part II
Shares of agri-equipment manufacturer Deere & Company (DE) are up 41% this year. The stock has tripled over the last 12 months. The market for its products is stronger than ever. While Wall Street experts are scratching their heads, investors are surely not complaining! (Tweet This)
Demand Beyond Expectations
A long-lasting trade war, flash floods, and the pandemic - the farm equipment business has had its challenges for the past few years; yet, it has only emerged stronger after overcoming each challenge. Tractor sales grew at an average of 46% YoY every month this year alone.
This revival in demand has taken the likes of equipment manufacturers such as Deere & Company by surprise. Having suspended its annual guidance in March 2020 at the onset of the pandemic, tractor and other farm equipment maker, Deere, is now unable to keep pace with production, in the face of an incessant rise in demand.
In November, Deere reported an order backlog of $8.1B in the agri and turf equipment segment. The waiting period for order delivery is now routinely six months.
Speed Breaker Ahead?
Consequently, Deere’s financial performance has spurred ahead. Q1 sales were up 23% - the first instance of double-digit sales growth in eight quarters. Deere had projected 2021 net income of around $3.8B. In light of this demand resurgence, the company has revised the number to around $4.8B.
Q1 was also the company's first billion-dollar quarter after Q2 2019, with a net income of $1.22B. In keeping with all of this positive sentiment, the stock has been climbing, perhaps even faster than demand for Deere’s products! This seems to have created some cause for concern that all of the good news has been priced in.
Wall Street experts concur that agribusiness is possibly beginning a multi-year growth cycle; however, Deere’s stock having tripled this past year, they do not see investment in Deere as the best way to reap the rewards. In fact, they’re suggesting taking profits. In fact, one analyst has downgraded the stock to “market perform” from “outperform.”
Be that as it may, Deere seems to be facing a labor shortage as well in spite of Middle America seeing substantial unemployment numbers due to the pandemic. While it has already hired close to 480 employees at its Iowa plant this year so far, it still needs to hire more than 300 people this year in order to meet demand.
The current upcycle may last for a couple of years; still, a little bit of rough weather will be enough to put a dent into the high-flying sector and consequently, investor sentiment. Experts may say what they think, but investors seem to be looking the other way as far as Deere is concerned.
Market Reaction
DE ended the day at $378.11, up 1.2%.
Company Snapshot 📈
DE $378.11 +4.48 (1.2%)
Analyst Ratings (23 Analysts) BUY 65% HOLD 22% SELL 13%
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Later Today 🕒
Whole Earth Brands Earnings (FREE)
Baker Hughes Annual General Meeting (BKR)
6:00 PM IST: Retail Sales
6:45 PM IST: Industrial Production
7:30 PM IST: Consumer Sentiment
Fun Fact of The Day 🌞
In 2011, a pair of managers from Dominos set fire to a Papa Johns to boost their sales
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