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What Is Going on With Farm Machinery Stocks?

Deere & Company (DE), AGCO Corporation (AGCO): What Is Going on With Farm Machinery Stocks?

The agriculture industry has been receiving some negative sentiment after Deere & Company (NYSE:DE)’s earnings release, as the giant agriculture machinery producer warned the market about deteriorating fundamentals for agricultural commodities in the near term.

Since then, the company has received a downgrade from Wells Fargo, Barrons, and Goldman Sachs. However, what was interesting to note was that Deere & Company (NYSE:DE) got the maximum punishment -- neither AGCO Corporation (NYSE:AGCO) nor CNH Global NV (NYSE:CNH) saw that big a decline since Deere’s fall.

Deere’s earnings call and analyst takeaways

Deere’s shares tumbled after management gave a cautious outlook on not just the world economy, but adverse weather patterns.

"Cool wet weather in North America has delayed crop planting, slowed construction activity and hurt sales of turf-care equipment."

Similarly, Well Fargo’s analyst claimed that U.S. crop cash flow was expected to decline 8% in 2013. Since farmers' income is positively correlated with farm machinery demand, this is likely to hamper sales of agricultural machinery. Barron’s also pointed out that:

"As goes the North American corn crop, so goes Deere & Company (NYSE:DE)'s stock price."

Source: John Deere


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