A farmer drives his tractor into the field, enters the configurations for autonomous operation, and lets the machine work while leaving the field and moving on to other tasks. With the help of the smartphone or tablet, control or changes to the settings can be made.
What sounds like a dream of the future is made possible by the "8R 410" model. The American agricultural technology group Deere had already presented this production-ready, fully autonomous tractor at the CES (Consumer Electronics Show) technology fair in Las Vegas at the beginning of 2022. It is precisely such technologies that are intended to help lead agriculture into the future and bring strong business to agricultural machinery manufacturers.
The world's population needs to be fed
Supply chain problems, higher raw material costs and rising wages, as well as the war in Ukraine, had led to a significant increase in food prices last year. This also caused euphoria in the case of Deere shares. The stock ended the stock market year 2022 with a price increase of 25 percent, while, for example, the major well-known technology stocks such as Apple, Amazon & Co. weakened in the face of higher interest rates and increased inflation.
At the end of November, the share price even climbed to a new all-time high and reached the $448 mark. Since then, things have calmed down. This led the share of the agricultural machinery manufacturer back to around 360 dollars. A price drop of almost 20 percent. In the long term, however, Deere is likely to have potential, according to analysts. Morningstar, for example, sees the fair value at $354 at the current price of $377.
Investors who have been involved with the group for some time know that Deere has potential. A 10,000-euro position has become more than 48,000 euros over the course of a decade to date. However, this investor story is likely to continue – which is also easy to understand:
The world's population is growing. As of November 2022, more than eight billion people live on Earth, according to the United Nations. These people need to be fed at a time when agricultural land is decreasing and the pressure on agriculture is also growing from an ecological point of view. New, more powerful machines and technologies are needed to make the production of agricultural products even more efficient. That's where companies like Deere come in.
Deere's strong balance sheet and outlook
The American agricultural machinery specialist – with its more than 80,000 employees and an annual turnover of more than 50 billion dollars – has also recently benefited from some short-term developments. After the Corona pandemic and the end of the rigorous Covid-19 measures, the supply chain problems had subsided somewhat. In addition, the Group continues to benefit from inflation and higher prices. For these reasons, the Group was able to present convincing figures for the second quarter (as of the end of April) of the current financial year.
Between February and April 2023, revenue was $17.4 billion. An increase of 34 percent compared to the previous year's figure. Net profit reached 2.86 billion dollars. Adjusted for non-recurring items, earnings per share were $9.65. This significantly exceeded Refinitiv's consensus estimates of $14.83 billion in revenue and $8.59 in earnings per share.
Thanks to the sustained good demand and the easing of the situation in the supply chain sector, the annual targets have now been raised. In terms of net income, the company's forecast rises from $8.75 billion to $9.25 billion to $9.25 billion. That's why Chairman and CEO John C. May said at the presentation of the latest quarterly results that the results so far show that Deere is well on its way to another year of "exceptional performance".