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3 Top Farm Equipment Stocks to Buy on Upbeat Commodity Prices
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The Zacks Manufacturing - Farm Equipment industry has been gaining from rising agricultural commodity prices. This, in turn, is driving farm income and encouraging farmers to invest more in agricultural equipment.
Riding on this momentum, some prominent industry players like Titan International, Inc. , Deere & Company (DE - Free Report) and AGCO Corporation (AGCO - Free Report) are investing in new agricultural products with advanced technology to make farming automated, easier and more precise across the production process. However, supply chain disruptions and inflationary costs remain near-term concerns.
Supply Risk Fuels Commodity Prices, Equipment Demand High
Russia’s invasion of Ukraine has created uncertainty in the global economy. Being the world’s largest grain exporters, escalating tensions between these countries have fueled concerns of impending supply disruptions of grains. This is driving agricultural commodity prices. Corn and soybean prices, the most important grains for cash crop farming, are moving higher. Corn prices have gained 33% in a year and currently stand at $742 a bushel amid supply concerns and export disruption from the Black Sea region.
Soybean is at $16 per bushel, gaining 15% year over year. Supply worries stemming from Argentina's decision to halt export registrations of soybean oil, soy meal and other related products, as well as drought conditions in South American growing belts, will support prices.
Despite limited government-sponsored financing programs, total crop cash receipts in the United States will likely be up 5.1% year over year in calendar 2022 on higher commodity prices, per the U.S Department of Agriculture. In fact, the U.S customer sentiment has moved up over the last few quarters with elevated exports to China.
High commodity prices bode well for demand for agricultural equipment. Apart from this, the need to replace aging equipment will continue to be a growth driver.
Investment in Advancement in Farming Technology
Customers are increasingly relying on advanced technology, smart farming solutions and mechanization to run their operations. Thus, the companies in the industry are focusing on launching products equipped with advanced technologies and features to keep up with the evolving demands of customers. Initiatives to expand in precision agriculture technology will be a game-changer for the industry, given its productivity-enhancing and sustainability benefits. Demand continues to grow for popular features, including automatic guide machines in the field and equipment that plants seeds and applies chemicals and fertilizers with exceptional accuracy. Over the long term, rising population and elevated global demand for food and efficient water use will fuel demand for the industry’s equipment.
Pricing Actions to Offset Cost Inflation & Supply Chain Woes
The industry participants are encountering supply chain tightness and raw material cost inflation, particularly of steel, as well as increased transportation costs. Shortage of labor might also affect their production levels, impairing their ability to meet demand. However, these headwinds are expected to abate through the year. The industry players are meanwhile implementing actions to bolster their financial condition, reserve cash and improve profitability. Also, cost control actions are likely to help protect margins.
Industry Performance
The Zacks Manufacturing - Farm Equipment industry has outperformed the Industrial Products sector and the S&P 500 over the past six months. Stocks in this industry have appreciated 21.5% compared with the Zacks Industrial Products sector’s growth of 1.4% and the S&P 500’s rise of 6.7%.
Image Source: Zacks Investment Research
3 Manufacturing - Farm Equipment Stocks Worth Betting On
We have picked three Farm Equipment stocks carrying a Zacks Rank #1 (Strong Buy) or 2 (Buy). These stocks have positive earnings growth projections for the current year and have also been witnessing upward revisions of late.
Titan International: Based-in Quincy, IL, the company is a leading global manufacturer of off-highway wheels, tires, assemblies and undercarriage products. Titan’s Agricultural segment is gaining from strong demand across all geographic markets and rising agricultural commodity prices. Recovery in the construction markets has been driving the company’s Earthmoving/Construction segment’s performance. Titan will also benefit from the implementation of pricing actions to mitigate escalating raw materials, labor and logistics costs.
The Zacks Consensus Estimate for the company’s current-year earnings has been revised upward by 23% over the past 60 days to $1.16 per share. The estimate also suggests a year-over-year surge of 36.5%. TWI’s shares have soared 103.8% in six months’ time. It pulled off a trailing four-quarter average earnings surprise of 47.6% and flaunts a Zacks Rank of 1, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Deere & Company: Based in Moline, IL, Deere is the world’s largest producer of agricultural equipment. The company is well-poised to benefit from surging demand for agricultural equipment, driven by higher agricultural commodity prices. Also, the improved scenario in the construction and forestry sector and investments in precision agriculture will aid growth. Efforts to reduce operating expenses will improve margins.
The Zacks Consensus Estimate for the company’s fiscal 2022 earnings has been revised upward by 2.3% over the past 60 days to $22.73. The estimate also suggests a year-over-year jump of 19.7%. The company’s shares have gained 21.4% over the past six months. It pulled off a trailing four-quarter average earnings surprise of 20.6% and currently carries a Zacks Rank #2.
AGCO Corporation: Based in Duluth, GA, AGCO is a leading manufacturer and distributor of agricultural equipment and related replacement parts. The company’s stellar sales volume, robust end-market demand and positive pricing are likely to deliver impressive results for the current year. Increasing replacement demand for aging fleets will also drive its top line. AGCO continues to invest in premium technology and smart farming solutions in a bid to strengthen product offerings. In addition, cost-control actions in response to material cost inflation will likely drive margins.
The Zacks Consensus Estimate for the company’s ongoing-year earnings is currently pegged at $11.63, suggesting a year-over-year increase of 12%. The consensus mark has moved 10.6% north over the past 60 days. The stock has rallied 16.3% in the past six months. The company currently carries a Zacks Rank of 2 and pulled off a trailing four-quarter earnings surprise of 56.6%, on average.
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3 Top Farm Equipment Stocks to Buy on Upbeat Commodity Prices
The Zacks Manufacturing - Farm Equipment industry has been gaining from rising agricultural commodity prices. This, in turn, is driving farm income and encouraging farmers to invest more in agricultural equipment.
Riding on this momentum, some prominent industry players like Titan International, Inc. , Deere & Company (DE - Free Report) and AGCO Corporation (AGCO - Free Report) are investing in new agricultural products with advanced technology to make farming automated, easier and more precise across the production process. However, supply chain disruptions and inflationary costs remain near-term concerns.
Supply Risk Fuels Commodity Prices, Equipment Demand High
Russia’s invasion of Ukraine has created uncertainty in the global economy. Being the world’s largest grain exporters, escalating tensions between these countries have fueled concerns of impending supply disruptions of grains. This is driving agricultural commodity prices. Corn and soybean prices, the most important grains for cash crop farming, are moving higher. Corn prices have gained 33% in a year and currently stand at $742 a bushel amid supply concerns and export disruption from the Black Sea region.
Soybean is at $16 per bushel, gaining 15% year over year. Supply worries stemming from Argentina's decision to halt export registrations of soybean oil, soy meal and other related products, as well as drought conditions in South American growing belts, will support prices.
Despite limited government-sponsored financing programs, total crop cash receipts in the United States will likely be up 5.1% year over year in calendar 2022 on higher commodity prices, per the U.S Department of Agriculture. In fact, the U.S customer sentiment has moved up over the last few quarters with elevated exports to China.
High commodity prices bode well for demand for agricultural equipment. Apart from this, the need to replace aging equipment will continue to be a growth driver.
Investment in Advancement in Farming Technology
Customers are increasingly relying on advanced technology, smart farming solutions and mechanization to run their operations. Thus, the companies in the industry are focusing on launching products equipped with advanced technologies and features to keep up with the evolving demands of customers. Initiatives to expand in precision agriculture technology will be a game-changer for the industry, given its productivity-enhancing and sustainability benefits. Demand continues to grow for popular features, including automatic guide machines in the field and equipment that plants seeds and applies chemicals and fertilizers with exceptional accuracy. Over the long term, rising population and elevated global demand for food and efficient water use will fuel demand for the industry’s equipment.
Pricing Actions to Offset Cost Inflation & Supply Chain Woes
The industry participants are encountering supply chain tightness and raw material cost inflation, particularly of steel, as well as increased transportation costs. Shortage of labor might also affect their production levels, impairing their ability to meet demand. However, these headwinds are expected to abate through the year. The industry players are meanwhile implementing actions to bolster their financial condition, reserve cash and improve profitability. Also, cost control actions are likely to help protect margins.
Industry Performance
The Zacks Manufacturing - Farm Equipment industry has outperformed the Industrial Products sector and the S&P 500 over the past six months. Stocks in this industry have appreciated 21.5% compared with the Zacks Industrial Products sector’s growth of 1.4% and the S&P 500’s rise of 6.7%.
Image Source: Zacks Investment Research
3 Manufacturing - Farm Equipment Stocks Worth Betting On
We have picked three Farm Equipment stocks carrying a Zacks Rank #1 (Strong Buy) or 2 (Buy). These stocks have positive earnings growth projections for the current year and have also been witnessing upward revisions of late.
Titan International: Based-in Quincy, IL, the company is a leading global manufacturer of off-highway wheels, tires, assemblies and undercarriage products. Titan’s Agricultural segment is gaining from strong demand across all geographic markets and rising agricultural commodity prices. Recovery in the construction markets has been driving the company’s Earthmoving/Construction segment’s performance. Titan will also benefit from the implementation of pricing actions to mitigate escalating raw materials, labor and logistics costs.
The Zacks Consensus Estimate for the company’s current-year earnings has been revised upward by 23% over the past 60 days to $1.16 per share. The estimate also suggests a year-over-year surge of 36.5%. TWI’s shares have soared 103.8% in six months’ time. It pulled off a trailing four-quarter average earnings surprise of 47.6% and flaunts a Zacks Rank of 1, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Deere & Company: Based in Moline, IL, Deere is the world’s largest producer of agricultural equipment. The company is well-poised to benefit from surging demand for agricultural equipment, driven by higher agricultural commodity prices. Also, the improved scenario in the construction and forestry sector and investments in precision agriculture will aid growth. Efforts to reduce operating expenses will improve margins.
The Zacks Consensus Estimate for the company’s fiscal 2022 earnings has been revised upward by 2.3% over the past 60 days to $22.73. The estimate also suggests a year-over-year jump of 19.7%. The company’s shares have gained 21.4% over the past six months. It pulled off a trailing four-quarter average earnings surprise of 20.6% and currently carries a Zacks Rank #2.
AGCO Corporation: Based in Duluth, GA, AGCO is a leading manufacturer and distributor of agricultural equipment and related replacement parts. The company’s stellar sales volume, robust end-market demand and positive pricing are likely to deliver impressive results for the current year. Increasing replacement demand for aging fleets will also drive its top line. AGCO continues to invest in premium technology and smart farming solutions in a bid to strengthen product offerings. In addition, cost-control actions in response to material cost inflation will likely drive margins.
The Zacks Consensus Estimate for the company’s ongoing-year earnings is currently pegged at $11.63, suggesting a year-over-year increase of 12%. The consensus mark has moved 10.6% north over the past 60 days. The stock has rallied 16.3% in the past six months. The company currently carries a Zacks Rank of 2 and pulled off a trailing four-quarter earnings surprise of 56.6%, on average.