For most investors, how much a stock's price changes over time is important. This factor can impact your investment portfolio as well as help you compare investment results across sectors and industries.
Another factor that can influence investors is FOMO, or the fear of missing out, especially with tech giants and popular consumer-facing stocks.
What if you'd invested in Deere (NYSE:DE) ten years ago? It may not have been easy to hold on to DE for all that time, but if you did, how much would your investment be worth today?
Deere's Business In-Depth
With that in mind, let's take a look at Deere's main business drivers.
Illinois-based Deere is the world’s largest producer of agricultural equipment, manufacturing agricultural machinery since 1837 under the iconic John Deere brand with its signature green and yellow color scheme. It is the 81st-largest company in the S&P 500 Index with a market capitalization of around $116 billion. It has an advantage in most farm machinery categories as its machines come with advanced features and are better constructed than its competitors. Deere is currently the world leader in precision agriculture and remains focused on revolutionizing agriculture with technology, in an effort to make farming automated, easier and more precise across the production process.
Beginning fiscal 2021, the company has four reportable segments. Agriculture and turf operations, which generated around 63% of Deere’s revenues in fiscal 2020 has been divided into two new segments:
The Production and Precision Agriculture segment is responsible for defining, developing, and delivering global equipment and technology solutions that cater to production-scale growers of large grains, small grains, cotton, and sugar. Primary products include large and certain mid-size tractors, combines, cotton pickers, sugarcane harvesters and loaders, and soil preparation, seeding, application and crop care equipment.
The Small Agriculture and Turf segment will deliver products to support mid-size and small growers and producers globally, and turf customers. It will cater to production systems for dairy and livestock, high-value crops, and turf and utility operators. Products include certain mid-size and small tractors, and hay and forage equipment, riding and commercial lawn equipment, golf course equipment, and utility vehicles.
The Construction and Forestry (25% of revenues in fiscal 2021) segment manufactures machines and service parts used in construction, earthmoving, material handling and timber harvesting. Deere also manufactures and distributes road building equipment through its wholly-owned subsidiaries of the Wirtgen Group.
Deere also finances sales and leases for new and used equipment through its Financial Services segment, which generated 10% of the Deere’s revenues in fiscal 2021.
Bottom Line
Putting together a successful investment portfolio takes a combination of research, patience, and a little bit of risk. For Deere, if you bought shares a decade ago, you're likely feeling really good about your investment today.
According to our calculations, a $1000 investment made in January 2012 would be worth $4,272.76, or a 327.28% gain, as of January 28, 2022. Investors should keep in mind that this return excludes dividends but includes price appreciation.
The S&P 500 rose 228.68% and the price of gold increased -0.81% over the same time frame in comparison.
Looking ahead, analysts are expecting more upside for DE.
Deere expects net income for fiscal 2022 to lie between $6.5 billion and $7 billion on improving farm and construction sectors. The ongoing rally in commodity prices will continue to fuel demand for agricultural equipment, encouraging farmers to boost spending on new farm equipment. Replacement demand triggered by the need to upgrade old equipment will also continue to support Deere's revenues. The company is likely to benefit from growth in non-residential investment and strong order activity from independent rental companies. Focus on investing in new products equipped with the latest technology will make farming automated, which will drive Deere's growth in the long haul. However, higher material and labor costs will likely dent its results. The earnings estimates for first-quarter fiscal 2022 have undergone downward revisions lately.
Shares have gained 9.92% over the past four weeks and there have been 3 higher earnings estimate revisions for fiscal 2022 compared to none lower. The consensus estimate has moved up as well.
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