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John Deere Pops on Robust Q1 Results: 4 ETFs to Tap
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Before the opening bell on Feb 21, the world’s largest agricultural equipment maker, Deere & Co (DE - Free Report) reported better-than-expected first-quarter fiscal 2021 results, beating estimates on both the top and bottom lines. In addition, the company lifted its fiscal year outlook.
Earnings per share came in at $3.87, well above the Zacks Consensus Estimate of $2.15 and more than doubled the year-ago earnings of $1.63. Revenues increased 19% year over year to $9.11 billion and beat the Zacks Consensus Estimate of $8.05 billion. Robust results were fueled by "improving conditions" in the farm and construction sectors.
The farm equipment giant expects that an improving market for agricultural and construction equipment will boost sales and profits this year as the global economy recovers from the COVID-19 pandemic. Rising farm commodity prices and higher exports coupled with lower equipment inventories have boosted the demand for farm machines. For fiscal 2020, the company expects net income to be in the range of $4.6-$5 billion, up from the previous projection of $3.6-$4.0 billion. Construction and forestry sales are expected to be $10.5-$11.00 billion and total farm and turf equipment sales are expected at $25.4 billion (read: Cyclical ETFs to Gain Amid the Bullish Market Scenario).
Market Impact
Following the solid results, shares of DE climbed nearly 10% to an all-time high on the day of its earnings announcement. Currently, John Deere has a Zacks Rank #3 (Hold) and a VGM Score of B. This also led to smooth trading in ETFs with the largest allocation to this farm equipment giant. Below, we have highlighted some of those funds.
iShares MSCI Global Agriculture Producers ETF (VEGI - Free Report) – Up 3.4%
This fund provides global exposure to the companies that produce fertilizers and agricultural chemicals, farm machinery, packaged foods and meats by tracking the MSCI ACWI Select Agriculture Producers Investable Market Index. Holding 141 stocks in its basket, Deere takes the top spot at 19.4% share. American firms account for 54% of the assets while Canada, Japan, and Norway round off the next three spots. The ETF is less popular and illiquid with $51.2 million in AUM and around 15,000 shares in average daily volume. It charges 39 bps in fees per year from investors (see: all Materials ETFs here).
First Trust Indxx Global Agriculture ETF (FTAG - Free Report) – Up 1.1%
This ETF follows the Indxx Global Agriculture Index, which is a market-capitalization weighted index, designed to measure the performance of companies, directly or indirectly engaged in improving the agricultural yields. It holds 46 stocks in its basket with John Deere occupying the top position at 10.5%. From the perspective of industrial exposure, chemicals take the largest share at 46.2%, followed by 23.2% in machinery, equipment & components. Here again, the United States is the top country with 34.8% share while Germany takes 23.5% share. FTAG is an overlooked ETF, having accumulated $4.1 million in AUM and trading in average daily volume of about 1,000 shares. It charges 70 bps in annual fees.
With AUM of $57.9 million, this fund offers exposure to companies that are involved in the production and distribution of commodities and commodity-related products and services in the following sectors — Agriculture, Alternatives (Water & Alternative Energy), Base and Industrial Metals, Energy, Forest Products, and Precious Metals. It tracks the VanEck Natural Resources Index, holding 340 stocks in its basket. John Deere takes the top spot at 9.6% of the assets. Here too, American firms dominate the portfolio with nearly 46.3% share, and materials is the top sector with 36.6%. The ETF charges 50 bps in annual fees and trades in average daily volume of 7,000 shares (read: Will the Energy ETFs See a Sustained Rally?).
This fund is by far the most popular choice in the space with an AUM of about $950.4 million and average daily volume of 150,000 shares. It tracks the MVIS Global Agribusiness Index, which offers exposure to companies, involved in agri-chemicals, animal health and fertilizers, seeds and traits, farm/irrigation equipment and farm machinery, aquaculture and fishing, livestock, cultivation and plantations, and trading of agricultural products. The fund holds 52 securities in its basket with John Deere capturing the top position with 8.6% share. It charges 56 bps in annual fees.
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John Deere Pops on Robust Q1 Results: 4 ETFs to Tap
Before the opening bell on Feb 21, the world’s largest agricultural equipment maker, Deere & Co (DE - Free Report) reported better-than-expected first-quarter fiscal 2021 results, beating estimates on both the top and bottom lines. In addition, the company lifted its fiscal year outlook.
Earnings per share came in at $3.87, well above the Zacks Consensus Estimate of $2.15 and more than doubled the year-ago earnings of $1.63. Revenues increased 19% year over year to $9.11 billion and beat the Zacks Consensus Estimate of $8.05 billion. Robust results were fueled by "improving conditions" in the farm and construction sectors.
The farm equipment giant expects that an improving market for agricultural and construction equipment will boost sales and profits this year as the global economy recovers from the COVID-19 pandemic. Rising farm commodity prices and higher exports coupled with lower equipment inventories have boosted the demand for farm machines. For fiscal 2020, the company expects net income to be in the range of $4.6-$5 billion, up from the previous projection of $3.6-$4.0 billion. Construction and forestry sales are expected to be $10.5-$11.00 billion and total farm and turf equipment sales are expected at $25.4 billion (read: Cyclical ETFs to Gain Amid the Bullish Market Scenario).
Market Impact
Following the solid results, shares of DE climbed nearly 10% to an all-time high on the day of its earnings announcement. Currently, John Deere has a Zacks Rank #3 (Hold) and a VGM Score of B. This also led to smooth trading in ETFs with the largest allocation to this farm equipment giant. Below, we have highlighted some of those funds.
iShares MSCI Global Agriculture Producers ETF (VEGI - Free Report) – Up 3.4%
This fund provides global exposure to the companies that produce fertilizers and agricultural chemicals, farm machinery, packaged foods and meats by tracking the MSCI ACWI Select Agriculture Producers Investable Market Index. Holding 141 stocks in its basket, Deere takes the top spot at 19.4% share. American firms account for 54% of the assets while Canada, Japan, and Norway round off the next three spots. The ETF is less popular and illiquid with $51.2 million in AUM and around 15,000 shares in average daily volume. It charges 39 bps in fees per year from investors (see: all Materials ETFs here).
First Trust Indxx Global Agriculture ETF (FTAG - Free Report) – Up 1.1%
This ETF follows the Indxx Global Agriculture Index, which is a market-capitalization weighted index, designed to measure the performance of companies, directly or indirectly engaged in improving the agricultural yields. It holds 46 stocks in its basket with John Deere occupying the top position at 10.5%. From the perspective of industrial exposure, chemicals take the largest share at 46.2%, followed by 23.2% in machinery, equipment & components. Here again, the United States is the top country with 34.8% share while Germany takes 23.5% share. FTAG is an overlooked ETF, having accumulated $4.1 million in AUM and trading in average daily volume of about 1,000 shares. It charges 70 bps in annual fees.
VanEck Vectors Natural Resources ETF (HAP - Free Report) – Up 2.3%
With AUM of $57.9 million, this fund offers exposure to companies that are involved in the production and distribution of commodities and commodity-related products and services in the following sectors — Agriculture, Alternatives (Water & Alternative Energy), Base and Industrial Metals, Energy, Forest Products, and Precious Metals. It tracks the VanEck Natural Resources Index, holding 340 stocks in its basket. John Deere takes the top spot at 9.6% of the assets. Here too, American firms dominate the portfolio with nearly 46.3% share, and materials is the top sector with 36.6%. The ETF charges 50 bps in annual fees and trades in average daily volume of 7,000 shares (read: Will the Energy ETFs See a Sustained Rally?).
VanEck Vectors Agribusiness ETF (MOO - Free Report) – Up 1.6%
This fund is by far the most popular choice in the space with an AUM of about $950.4 million and average daily volume of 150,000 shares. It tracks the MVIS Global Agribusiness Index, which offers exposure to companies, involved in agri-chemicals, animal health and fertilizers, seeds and traits, farm/irrigation equipment and farm machinery, aquaculture and fishing, livestock, cultivation and plantations, and trading of agricultural products. The fund holds 52 securities in its basket with John Deere capturing the top position with 8.6% share. It charges 56 bps in annual fees.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>