Deere & Company manufactures and distributes various equipment worldwide agriculture equipment such as utility tractors; tractor loaders; combines, cotton pickers, cotton strippers, and sugarcane harvesters; harvesting front-end equipment; sugarcane loaders and pull-behind scrapers; and tillage, seeding, and application equipment.
Bill Gates through his Cascade Investments co. owns 10% of Deere’s outstanding shares. He’s been buying Deere shares for years. Regarding Deere, Bill thinks the world needs a replay of the “Green Revolution” of the 1960s and 1970s, when new farming technologies, including new seed varieties of rice, wheat, and corn, increased the amount of food available and decreased its price. So, a small investment and interests gives him skin in the game because if ignored almost 10% of the world’s population won’t know where their next meal will come from.
Three months ago, Deere reported their fourth quarter earnings. Deere reported a net profit of $722 million or $2.27 / share and sales that rose 5% to $9.896 billion beating expectations of $8.467 billion. Despite beating expectations, the stock fell 5% due to dismal forward guidance.
The coronavirus epidemic in China has raised concerns over a slowdown in the global economy, but agricultural commodities such as wheat, corn, and cattle are unlikely to suffer, and may get a boost when coronavirus worries ease analysts say.
“There will be no real demand destruction in agriculture from the coronavirus,” says Sal Gilbertie, president and chief investment officer at Teucrium Trading. “People still need to eat, which means agriculture demand will not abate.”
The coronavirus “lethargy” in grain and meat prices could provide investors with a chance to gain access to agricultural commodities prior to any Chinese buying that will occur from the U.S.-China phase-one trade agreement, he says.
Last week, Deere reported earnings once again. Deere reported stronger-than-expected earnings and revenue for the first quarter. Earnings came in at $1.63 per share vs expectations of $1.25 per share and revenue came in at $6.53 billion vs. expectations of $6.409 billion.
However, Management did say they expect a slowdown in heavy equipment orders from Canada and a drop in worldwide construction and forestry equipment sales. In addition, they do expect some type of impact in their supply chain as the spread of the coronavirus around the world continues.
On the news, the stock rallied, but then sold off.
Bigger picture, the stock price has been losing momentum and the only way prices move higher, the US dollar must decline, which in turn will increase commodities price which will serve as a catalyst to buy more equipment from Deere.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
Posted via Steemleo
