The growing demand for food products is incentivizing farmers to buy advanced farm equipment and focus on smart farming solutions to achieve better crop yields. Low borrowing costs and debt relief to farmers promised in the approved U.S. budget resolution should enable farmers to buy or replace farm equipment to reduce their production costs and ease operations. The reopening of construction activities is also driving the demand for farm and heavy construction machinery.
This growing demand has propelled companies to manufacture efficient, eco-friendly, heavy construction machinery despite supply chain constraints and rising input costs. Also, the Senate’s passage of the $1 trillion bipartisan infrastructure bill will likely favor the growth of companies that manufacture heavy machinery.
So, we think it could be wise to bet on Deere & Company (DE), AGCO Corporation (AGCO), Oshkosh Corporation (OSK), Terex Corporation (TEX), and Alamo Group Inc. (ALG). They have the potential to capitalize on the industry tailwinds and deliver solid returns in the near-term. Each of these stocks is rated B (Buy) in our proprietary POWR Ratings system.
Deere & Company (DE)
DE, in Moline, Ill., manufactures and distributes equipment used in agriculture, construction, forestry, and turf care. The company also offers wholesale financing to dealers of the equipment, extended equipment warranties, and retail revolving charge accounts.
In an announcement dated August 19, 2021, DE agreed with Hitachi Construction Machinery Co., Ltd. to end the Deere-Hitachi joint venture manufacturing and marketing agreements and continue manufacturing Deere-branded construction and forestry excavators by acquiring Deere-Hitachi joint-venture factories in the Americas. DE is looking forward to accelerating the development of industry-leading technology and machinery to meet the need for smarter, safer, and more sustainable construction.
DE acquired Bear Flag Robotics, an agriculture technology startup, for $250 million on August 5. The move contributes to DE’s long-term strategy to create smarter machines with autonomous and automation technology to support farmers’ needs and create more sustainable and profitable operations.
DE’s total net sales and revenues for its fiscal third quarter, ended August 1, 2021, increased 29.2% year-over-year to $11.53 billion. The company’s total operating profit came in at $2.24 billion, representing a 61.4% rise from the prior-year period. Its net income has been reported at $1.67 billion, up 105.5% from the prior-year period. Its EPS increased 107% year-over-year to $5.32. The company had $7.52 billion in cash and cash equivalents as of August 1, 2021.
A $4.11 consensus EPS estimate for the current quarter, ending October 31, 2021, represents a 72% improvement year-over-year. DE surpassed consensus EPS estimates in each of the trailing four quarters. The $10.57 billion consensus revenue estimate for the current quarter represents a 22.1% gain from the prior-year period. Analysts expect the stock’s EPS to grow at a 38.5% rate per annum over the next five years.
The stock has gained 83.9% over the past year and 6.5% over the past six months. It closed Friday’s trading session at $351.43.
DE’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Sentiment and Growth. Click here to see the additional ratings for DE (Quality, Stability, Value, and Momentum).
DE is ranked #33 of 83 stocks in the A-rated Industrial - Machinery industry.
Click here to check out our Industrial Sector Report for 2021
AGCO Corporation (AGCO)
AGCO is a manufacturer and distributor of agricultural equipment and related replacement parts worldwide. The firm’s products include tractors, combines, sprayers, hay tools, forage equipment, seeding and tillage equipment, implements, and grain storage and protein production systems. It also provides retail and wholesale financing through its finance joint ventures. AGCO is based in Duluth, Ga.
On May 28, AGCO entered a proof of concept (PoC) collaboration agreement with Robert Bosch GmbH, BASF Digital Farming, and Raven Industries Inc. (RAVN) to evaluate targeted spraying technology, which provides a significant reduction in herbicide use in growing crops and fallow ground, as well as night and day applications, thus driving farm and environmental sustainability. AGCO expects to see rising demand for this technology in the coming months.
On May 4, in collaboration with Infosys (INFY), a global leader in next-generation digital services and consulting, AGCO developed FendtONE, an enhanced customer relationship management (CRM) solution for AGCO’s dealers and customers. The company hopes its platforms will maximize farmers’ experiences with its products and services with easy-to-use, smart and high-quality solutions.
For its fiscal second quarter, ended June 30, 2021, AGCO’s net sales increased 43.5% year-over-year to $2.88 billion. The company’s gross profit has been reported at $692.40 million, representing a 60% year-over-year improvement. Its adjusted income from operations came in at $295 million, up 143.4% from the prior-year period. While its adjusted net income increased 162.5% year-over-year to $218.90 million, its adjusted EPS increased 159.5% to $2.88. As of June 30, 2021, the company had $500.20 million in cash and cash equivalents.
AGCO surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expect its revenue to be $2.84 billion for the current quarter, representing a 13.8% rise year-over-year. Its EPS is expected to grow at a 26.4% rate per annum over the next five years.
The stock has gained 82% over the past year and 4.6% over the past month. It ended Friday’s trading session at $129.34.
AGCO’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has an A grade for Value, and a B grade for Sentiment. Click here to see the additional ratings for AGCO (Growth, Stability, Momentum, and Quality).
AGCO is ranked #8 of 31 stocks in the Agriculture industry.
Oshkosh Corporation (OSK)
OSK is a leading designer, manufacturer, and marketer of a broad range of specialty access equipment, commercial, fire & emergency, and military vehicles and vehicle bodies worldwide. The Oshkosh, Wis.-based company provides its products through direct sales representatives, dealers, and distributors.
On July 26, 2021, The U.S. Army Contracting Command – Detroit Arsenal (ACC-DTA) selected OSK’s Oshkosh Defense subsidiary and other industry partners to participate in the concept design Phase for the U.S. Army’s Optionally Manned Fighting Vehicle (OMFV) program. Oshkosh Defense will develop initial concepts supported by modeling, simulation, and analysis (MS&A), which will inform OMFV requirements up to a system functional review (SFR). OSK is looking forward to a long-term partnership with the U.S. Army.
On June 22, OSK’s Oshkosh Defense announced plans to open a dedicated facility in Spartanburg, S.C., where it will build the United States Postal Service (USPS) Next Generation Delivery Vehicle (NGDV). Expected to begin production in 2023, OSK will deliver 50,000 - 165,000 vehicles over a period of 10 years to replace an existing fleet of delivery vehicles.
OSK’s net sales for its fiscal third quarter, ended June 30, 2021, increased 39.7% year-over-year to $2.21 billion. The company’s gross profit came in at $384.60 million, up 49.4% from the prior-year period. Its adjusted operating income has been reported at $205.10 million for the quarter, up 59.2% from the prior-year period. OSK’s adjusted net income came in at $145.40 million, representing a 64.1% year-over-year improvement. Its adjusted EPS increased 62% year-over-year to $2.09. As of June 30, 2021, the company had $1.17 billion in cash and cash equivalents.
For the current quarter, ending September 30, 2021, analysts expect OSK’s EPS to be $1.82, up 40.4% from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The $2.17 billion consensus revenue estimate for the current quarter represents a 21.7% rise from the prior-year period. Analysts expect OSK’s EPS to grow at a 21.3% rate per annum over the next five years.
OSK shares gained 45.2% in price over the past year and 12.7% over the past six months. They ended Friday’s trading session at $112.52.
OSK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has an A grade for Value. We have also graded OSK for Growth, Stability, Sentiment, Momentum, and Quality. Click here to access all OSK’s ratings.
Of the 62 stocks in the Auto & Vehicle Manufacturers industry, OSK is ranked #17.
Click here to check out our Automotive Industry Report for 2021
Terex Corporation (TEX)
TEX manufactures lifting and material processing products and services worldwide that deliver lifecycle solutions. The Westport, Conn. company offers lifecycle solutions to construction, manufacturing, transportation, refining, energy, utility, and mining industries. It provides financial products to assist customers in renting, leasing, and acquisition of its products.
For its fiscal second quarter, ended June 30, 2021, TEX’s net sales increased 21.5% year-over-year to $1.04 billion. The company’s gross profit came in at $231.60 million, up 116.2% from the prior-year period. Its income from operations was $122.50 million, representing a 1555.4% year-over-year improvement. TEX’s net income has been reported at $73.90 million for the quarter, versus a $9.20 million loss in the prior-year period. Its EPS came in at $1.04, compared to a $0.13 loss. The company had $542.20 million in cash and cash equivalents as of June 30, 2021.
Analysts expect TEX’s EPS to improve 193.1% year-over-year in the current quarter, ending September 30, 2021, to $0.91. It surpassed the Street’s EPS estimates in each of the trailing four quarters. A $1.04 billion consensus revenue estimate for the current quarter represents a 36.4% rise from the prior-year period. Analysts expect the stock’s EPS to grow at a 235.5% rate per annum over the next five years.
TEX’ stock has gained 144.3% in price over the past year and 9.3% over the past month. It closed Friday’s trading session at $48.73.
TEX’s POWR Ratings reflect its solid prospects. The company has an overall B rating, which translates to Buy in our proprietary rating system.
TEX has an A grade for Growth and Value. In addition to the POWR Ratings grades we’ve just highlighted, one can see TEX’s ratings for Stability, Quality, Sentiment, and Momentum here.
Of the 55 stocks in the B-rated Industrial - Building Materials industry, TEX is ranked #12.
Click here to check out our Industrial Sector Report for 2021
Alamo Group Inc. (ALG)
ALG in Seguin, Tex., designs, manufactures, distributes, and services agricultural and infrastructure maintenance equipment for governmental and industrial use around the globe. The company offers hydraulically powered and tractor-mounted mowers, heavy-duty tractors, truck-mounted mowing, vegetation maintenance equipment, and replacement parts.
For its fiscal second quarter, ended June 30, 2021, ALG’s total net sales came in at $347.55 million, representing a 29.4% improvement from the prior-year period. The company’s gross profit increased 30% year-over-year to $88.14 million. Its income from operations is reported at $33.59 million for the quarter, up 48.2% from the prior-year period. ALG’s net income came in at $26.04 million for the quarter, representing a 100.5% rise from the prior-year period. And its EPS increased 99.1% year-over-year to $2.19. The company had $85.63 million in cash and cash equivalents as of June 30, 2021.
A $2.09 consensus EPS estimate for the current quarter, ending September 30, 2021, represents a 25.2% improvement year-over-year. ALG surpassed consensus EPS estimates in three of the trailing four quarters. The $347.20 million consensus revenue estimate for the current quarter represents a 19% gain from the prior-year period. Analysts expect the stock’s EPS to grow at a 6.6% rate per annum over the next five years.
The stock has gained 33.1% over the past year and 2.8% over the past month. It closed Friday’s trading session at $147.17.
It’s no surprise that ALG has an overall B rating, which equates to Buy in our POWR Ratings system.
The stock has an A grade for Sentiment, and a B grade for Stability and Quality. Click here to see the additional ratings for ALG’s Growth, Value, and Momentum.
ALG is ranked #14 of 83 stocks in the A-rated Industrial - Machinery industry.
Click here to check out our Industrial Sector Report for 2021
DE shares were trading at $361.97 per share on Monday afternoon, up $10.54 (+3.00%). Year-to-date, DE has gained 35.21%, versus a 20.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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