However, Deere and its share price have been under pressure since February, when the company reported stronger-than-expected quarterly figures, but briefed investors to expect this year’s net profits to come in between $7.5bn (£6bn) and $7.75bn. This was as much as $500m below its previous guidance and considerably short of last year’s result; it prompted some analysts to argue that spending on agricultural equipment was heading for a downturn.
And this is where the investment case for Deere comes into its own. It is true that it will always be vulnerable to the ups and downs of economic cycles. Deere is moving to counter this by aiming to generate 40pc of its revenues from recurring sources such as software and maintenance contracts by the end of the decade.
Yet it is also true that Deere’s tech wizardry should be instrumental in helping farmers achieve what they need to over the longer term – and that is to grow more food, for more people, on ever decreasing amounts of land. The data-gathering iPads in its cabs are there for precisely that reason.
It is no accident that Deere has agreed a deal with Elon Musk’s SpaceX outfit to beam satellite-based internet services to farmers in remote locations through its Starlink network; trials are set to begin later this year for a partnership that can only help boost crop yields for more farmers.
Top-performing fund managers remain unworried by the near-term decline in Deere’s share price. Daniel Ong, of Avantis Investors, said: “It is common for a company’s stock price to be pushed down significantly after management provides disappointing guidance. These lower prices may present investors with return premiums that can be attractive.”
This column agrees.
Questor says: buy
Ticker: NYSE:DE
Share price at close: $400.32
Miles Costello is a contributing journalist at Citywire Elite Companies
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