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John Deere Profit Doubles But Shares Dip: ETFs in Focus
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Before the opening bell on Aug 20, the world’s largest agricultural equipment maker under the iconic John Deere brand, Deere & Co (DE - Free Report) , reported better-than-expected third-quarter fiscal 2021 results, beating estimates on both the top and bottom lines. In addition, the company lifted its fiscal year outlook on strong demand for its farm and construction equipment.
Earnings per share came in at $5.32, well above the Zacks Consensus Estimate of $4.49 and surged 107% from year-ago earnings. Equipment revenues increased 32% year over year to $10.4 billion and beat the Zacks Consensus Estimate of $10.2 billion. Robust results were fueled by strength in all the product categories.
Going forward, the farm equipment giant expects demand for farm and construction equipment to continue benefiting from favorable fundamentals. For fiscal 2020, the company raised its net income forecast from $5.3-$5.7 billion to $5.7-$5.9 billion. Production and precision agriculture sales are projected to grow 25-30%. Construction and forestry sales are expected to grow 30% and small agriculture and turf equipment sales are likely to grow 25%.
However, Deere expects to continue grappling with inflationary pressure and supply chain challenges, which are set to intensify and expected to persist beyond this year. This concern has pushed Deere shares down 2.1% at the close on the day of the earnings announcement (read: ETF Strategies to Prepare for IMF's Inflation Warning).
Currently, John Deere has a Zacks Rank #2 (Buy) and VGM Score of A. This will lead to smooth trading in ETFs with the largest allocation to this farm equipment giant. Below, we have highlighted some of those funds.
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 150 stocks in its basket, Deere takes the top spot at 20.6% share. American firms account for 54.6% of the assets while Canada, Norway and Japan round off the next three spots. The ETF is less popular and illiquid with $88.2 million in AUM and around 21,000 shares in an 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)
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 51 stocks in its basket with John Deere occupying the top position at 10.7%. From the perspective of industrial exposure, materials takes the largest share at 51.9%, followed by 30.5% in industrials and 9.2% in healthcare. Here again, the United States is the top country with 29.4% share while Germany takes 22.3% share. FTAG is an overlooked ETF, having accumulated $5.6 million in AUM and trading in an average daily volume of about 1,000 shares. It charges 70 bps in annual fees.
With AUM of $74.5 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 363 stocks in its basket. John Deere takes the top spot at 8.7% of the assets. Here too, American firms dominate the portfolio with nearly 48.5% share, and materials is the top sector with 39.7%. The ETF charges 49 bps in annual fees and trades in an average daily volume of 7,000 shares (read: Most Interesting New ETFs of 2021).
This fund is by far the most popular choice in the space with an AUM of about $1.1 billion and an average daily volume of 82,000 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 second position with 8.4% share. It charges 55 bps in annual fees.
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John Deere Profit Doubles But Shares Dip: ETFs in Focus
Before the opening bell on Aug 20, the world’s largest agricultural equipment maker under the iconic John Deere brand, Deere & Co (DE - Free Report) , reported better-than-expected third-quarter fiscal 2021 results, beating estimates on both the top and bottom lines. In addition, the company lifted its fiscal year outlook on strong demand for its farm and construction equipment.
Earnings per share came in at $5.32, well above the Zacks Consensus Estimate of $4.49 and surged 107% from year-ago earnings. Equipment revenues increased 32% year over year to $10.4 billion and beat the Zacks Consensus Estimate of $10.2 billion. Robust results were fueled by strength in all the product categories.
Going forward, the farm equipment giant expects demand for farm and construction equipment to continue benefiting from favorable fundamentals. For fiscal 2020, the company raised its net income forecast from $5.3-$5.7 billion to $5.7-$5.9 billion. Production and precision agriculture sales are projected to grow 25-30%. Construction and forestry sales are expected to grow 30% and small agriculture and turf equipment sales are likely to grow 25%.
However, Deere expects to continue grappling with inflationary pressure and supply chain challenges, which are set to intensify and expected to persist beyond this year. This concern has pushed Deere shares down 2.1% at the close on the day of the earnings announcement (read: ETF Strategies to Prepare for IMF's Inflation Warning).
Currently, John Deere has a Zacks Rank #2 (Buy) and VGM Score of A. This will lead 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) )
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 150 stocks in its basket, Deere takes the top spot at 20.6% share. American firms account for 54.6% of the assets while Canada, Norway and Japan round off the next three spots. The ETF is less popular and illiquid with $88.2 million in AUM and around 21,000 shares in an 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)
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 51 stocks in its basket with John Deere occupying the top position at 10.7%. From the perspective of industrial exposure, materials takes the largest share at 51.9%, followed by 30.5% in industrials and 9.2% in healthcare. Here again, the United States is the top country with 29.4% share while Germany takes 22.3% share. FTAG is an overlooked ETF, having accumulated $5.6 million in AUM and trading in an average daily volume of about 1,000 shares. It charges 70 bps in annual fees.
VanEck Vectors Natural Resources ETF (HAP - Free Report)
With AUM of $74.5 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 363 stocks in its basket. John Deere takes the top spot at 8.7% of the assets. Here too, American firms dominate the portfolio with nearly 48.5% share, and materials is the top sector with 39.7%. The ETF charges 49 bps in annual fees and trades in an average daily volume of 7,000 shares (read: Most Interesting New ETFs of 2021).
VanEck Vectors Agribusiness ETF (MOO - Free Report)
This fund is by far the most popular choice in the space with an AUM of about $1.1 billion and an average daily volume of 82,000 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 second position with 8.4% share. It charges 55 bps in annual fees.