The same circumstances that are causing rising prices in many parts of the economy is also evident in agriculture. These rising prices will make farmers wealthier and incentivize increased planting which will benefit agriculture equipment stocks.
These stocks are quite attractive from a value perspective and could run higher for many years especially as many believe that ag prices have further room to run.
Deere & Company (DE)
DE, based in America’s heartland of Illinois, is the globe’s largest producer of equipment used in the agricultural sector. The company has made agricultural machinery going all the way back to the early 19th century. DE’s farm machines are the cream of the crop, containing a litany of advanced features that are not found in other competing vehicles.
DE has a forward P/E ratio of 20.09, meaning the stock might be a bit overpriced. However, DE is trading fairly close to its 52-week high of $400.34 so the rich valuation is somewhat expected. DE is not a volatile stock as its beta is a cool 1.04. In other words, if you are looking for a haven due to potential market turmoil, DE appears to be a solid play.
DE is a mixed bag in the POWR Ratings. The stock has an overall POWR Rating of B indicating it is a Buy. DE has an A in the Sentiment component along with Cs in the Quality, Stability, and Momentum components. Investors who would like to learn how DE fares in the Growth and Value components can find out by clicking here.
DE is ranked 28th of 86 stocks in the Industrial – Machinery space. This sector as a whole has an A POWR Rating grade. You can find out more about the stocks in this segment by clicking here.
The analysts are DE believers, establishing an average target price of $410.90 for the stock. If DE hits this level, it will have increased by more than 15%. A total of two dozen analysts have issued DE recommendations with eight viewing it as a Strong Buy, seven viewing it as a Buy, seven viewing it as a Hold, one considering it a Sell and one more considering it to be a Strong Sell.
Agco Corporation (AGCO)
AGCO is one of the top makers and distributors of agricultural equipment and replacement parts for agricultural machines. AGCO’s farm equipment product line is available to distributors and dealers in 140 nations. AGCO sells tractors, application equipment, combines, self-propelled sprayers, forage equipment, hay tools, and more.
AGCO has an A POWR Rating grade. The stock has As in the Value and Growth components along with a B in the Sentiment component. Click here to find out how AGCO fares in the rest of the POWR Ratings components such as Quality, Momentum, and Stability.
Of the 30 publicly traded companies in the Agriculture space, AGCO is ranked first. You can find out more about this industry by clicking here.
AGCO has a reasonable forward P/E ratio of 15.75. The company’s beta of 1.34 is also reassuring as it indicates the stock will not be egregiously volatile should the market get rocky.
Note that AGCO is one of the few stocks handpicked by our Chief Value Strategist, David Cohne, currently in the POWR Value portfolio. Learn more here.
CAT’s famous yellow construction vehicles are nearly ubiquitous. Visit any part of the country where growth is occurring and you will likely find CAT construction vehicles.
CAT has a B overall POWR Rating grade indicating it is a Buy. The stock has a B Growth component grade along with Cs in the Stability, Sentiment, and Quality components. Click here to find out how CAT grades out in the Value and Momentum components of the POWR Ratings.
Of the 86 stocks in the Industrial – Machinery space, CAT is smack dab in the middle, slotting in at 46th overall. The Industrial – Machinery industry as a whole has an A POWR Rating grade. You can find out more about the stocks in this space by clicking here.
CAT has a forward P/E ratio of 24.82 which is a bit high for a construction stock. However, this elevated ratio is more understandable when you factor in that the stock is trading about $6 away from its 52-week high.
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CAT shares were trading at $236.64 per share on Wednesday morning, down $3.52 (-1.47%). Year-to-date, CAT has gained 31.29%, versus a 13.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...
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