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Those just might be the two most important words in business – especially in an environment of strong economic activity, but also inflationary pressures. The firms that are adept at providing the goods and services that their customers demand are seeing rising revenues as the US rapidly emerges from Covid-19 shutdown, but if their costs are rises faster than the prices they receive, that won’t translate to increased net profit results.
And ultimately, net profits are the thing investors should care about most.
If you’ve been to the grocery store lately, you’re familiar with the idea that food prices are rising. Many of the input costs of producing grains, meat, fruit, and vegetables are rising - and pulling up prices at the checkout aisle. The food supply in the US is a complicated ecosystem. When the prices of corn and soybeans rise, so do the cost of both finished products and meat from the animals that need to be fed before they’re brought to market.
And if you’ve driven across the fertile breadbasket of our country lately, you’ve probably seen more green and yellow pieces of equipment that you could count. Illinois-based Deere and Company (DE - Free Report) has been the leading manufacturer of innovative farm equipment for over 180 years.
What you can’t see behind the recognizable exterior of those implements is that they’re hugely advanced in terms of technology. What still pretty much looks like a standard tractor or combine on the outside has a staggering amount of technology beneath the surface that helps farmers increase yields and spend less hours in the field.
“You’ve Got to Make the Hay While the Sun is Shining.”
...And the sun is definitely shing on Deere right now. It’s basic Economics 101. As the prices of those finished agricultural products rise, the people and businesses that produce our food have both additional cash flow to spend on new equipment and the economic need to maximize the efficiency of their operations so that they can sell the greatest possible quantity of goods to the market.
Deere develops and manufactures the equipment that helps farmers add directly to their own bottom line. Demand has literally never been stronger. It also means that when the price of raw materials to make that advanced machinery rise, Deere is able to pass along price increases to it’s customers, preserving gross margins.
It’s one of those companies that makes you look twice at the financial data and future estimates - because you literally can’t believe your eyes at the first glance. Companies with $39 billion in annual revenues from selling hard goods don’t often grow those revenues at a double-digit annual pace, but Deere does:
Image Source: Zacks Investment Research
Next, take a look at net earnings. They’re going to be almost $18/share in fiscal 2021, more than double what they were last year. And just in case you think that’s an aberration, the consensus forecast is for more than $20/share in net earnings next year.
Image Source: Zacks Investment Research
With 10 recent upward earnings estimate revisions, Deere and Company enjoys a Zacks Rank #1 (Strong Buy).
Even with a $350 share price, Deere remains a strong value stock with a 19.5X P/E Ratio, 15% lower than the average of the S&P 500. It also pays a reliable annual dividend yield of just over 1%. That may not sound all that glamorous, but in an environment in which 10-year Treasury Notes only pay 1.3%, it’s a very solid yield from a stock that's also enjoying excellent earnings growth.
At a golden moment for the US economy, investors would be wise to consider adding this quintessentially American company to their portfolios.
Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How to Profit from Trillions on Spending for Infrastructure >>
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Bull of the Day: Deere and Company (DE)
Pricing power.
Those just might be the two most important words in business – especially in an environment of strong economic activity, but also inflationary pressures. The firms that are adept at providing the goods and services that their customers demand are seeing rising revenues as the US rapidly emerges from Covid-19 shutdown, but if their costs are rises faster than the prices they receive, that won’t translate to increased net profit results.
And ultimately, net profits are the thing investors should care about most.
If you’ve been to the grocery store lately, you’re familiar with the idea that food prices are rising. Many of the input costs of producing grains, meat, fruit, and vegetables are rising - and pulling up prices at the checkout aisle. The food supply in the US is a complicated ecosystem. When the prices of corn and soybeans rise, so do the cost of both finished products and meat from the animals that need to be fed before they’re brought to market.
And if you’ve driven across the fertile breadbasket of our country lately, you’ve probably seen more green and yellow pieces of equipment that you could count. Illinois-based Deere and Company (DE - Free Report) has been the leading manufacturer of innovative farm equipment for over 180 years.
What you can’t see behind the recognizable exterior of those implements is that they’re hugely advanced in terms of technology. What still pretty much looks like a standard tractor or combine on the outside has a staggering amount of technology beneath the surface that helps farmers increase yields and spend less hours in the field.
“You’ve Got to Make the Hay While the Sun is Shining.”
...And the sun is definitely shing on Deere right now. It’s basic Economics 101. As the prices of those finished agricultural products rise, the people and businesses that produce our food have both additional cash flow to spend on new equipment and the economic need to maximize the efficiency of their operations so that they can sell the greatest possible quantity of goods to the market.
Deere develops and manufactures the equipment that helps farmers add directly to their own bottom line. Demand has literally never been stronger. It also means that when the price of raw materials to make that advanced machinery rise, Deere is able to pass along price increases to it’s customers, preserving gross margins.
It’s one of those companies that makes you look twice at the financial data and future estimates - because you literally can’t believe your eyes at the first glance. Companies with $39 billion in annual revenues from selling hard goods don’t often grow those revenues at a double-digit annual pace, but Deere does:
Next, take a look at net earnings. They’re going to be almost $18/share in fiscal 2021, more than double what they were last year. And just in case you think that’s an aberration, the consensus forecast is for more than $20/share in net earnings next year.
With 10 recent upward earnings estimate revisions, Deere and Company enjoys a Zacks Rank #1 (Strong Buy).
Even with a $350 share price, Deere remains a strong value stock with a 19.5X P/E Ratio, 15% lower than the average of the S&P 500. It also pays a reliable annual dividend yield of just over 1%. That may not sound all that glamorous, but in an environment in which 10-year Treasury Notes only pay 1.3%, it’s a very solid yield from a stock that's also enjoying excellent earnings growth.
At a golden moment for the US economy, investors would be wise to consider adding this quintessentially American company to their portfolios.
Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale. Download FREE: How to Profit from Trillions on Spending for Infrastructure >>