We recently compiled a list of the 10 Best Industrial Machinery Stocks to Buy Now. In this article, we are going to take a look at where Deere & Company (NYSE:DE) stands against the other industrial machinery stocks.
Industrial stocks form the backbone of the American economy, encompassing companies that manufacture and maintain equipment used in the construction and manufacturing markets, such as compressors, turbines, and hydraulic systems. Their presence in the Dow Jones highlights their significance in the market.
According to Global Market Insights, the industrial machinery market, which was valued at $693.7 billion in 2023, is projected to grow at a compound annual growth rate of 7.5% between 2024 and 2032 as a result of the increasing application of automation and smart technologies, which significantly boost efficiency and production. Material handling and robotics are two important industries driving this expansion since they are essential to contemporary industrial operations.
Regionally, the Asia-Pacific area is driving this expansion as per the aforementioned research, with growing industrialization in countries like China and India. In terms of country, the United States is leading the North American industrial machinery market in terms of revenue, with an estimated 2023 revenue of $246.5 billion and a projected 2032 revenue of $402.9 billion. Moreover, North America accounted for 45% of the industrial machinery market in 2023.
Looking ahead, according to Deloitte’s Manufacturing Industry 2024 Outlook, the manufacturing sector is utilizing the Infrastructure Investment and Jobs Act, CHIPS Act, and Inflation Reduction Act to boost growth through improved semiconductor manufacturing and construction. Digital transformation is still essential in spite of economic challenges and a lack of skilled workers. Industrial metaverse capabilities are being integrated into smart factory systems, which are 12% more productive and cited by 86% of manufacturing leaders as essential for competitiveness. A game-changer, generative AI reduces labor restrictions while improving supply chain efficiency and product design.
That said, according to Interact Analysis’s Manufacturing Industry Output Tracker (MIO), which Industrial Machinery Digest released on May 30, 2024, the global manufacturing industry is predicted to grow by just 0.6% in 2024, showing stagnation or minor decline in the majority of regions. The study mentioned that China’s growth estimate was reduced from 2.8% to 2.4%, pointing out economic issues that may affect its 50% global manufacturing share. Although a slight decline is predicted in 2026 before a consistent rise through 2028, a recovery is projected in 2025 as global conditions improve. While Taiwan, South Korea, and Singapore benefit from the semiconductor resurgence, the United States exhibits stronger manufacturing fueled by rising consumer expenditure and moderating inflation. Challenges include the slowdown in European manufacturing and pressures on the machinery market caused by high loan rates, which increase costs and reduce order intake. High living expenses still limit demand even though post-Covid supply chain problems have decreased.
Adrian Lloyd, CEO of Interact Analysis, made the following comment in Manufacturing Industry Output Tracker (MIO):
“The global outlook for manufacturing output is mixed to say the least. Our projections are holding but there are no clear signs of where recovery will come from and how strong it will be. As a result, we will be watching closely to see how constrained consumer spending in China, a strengthening US economy and global events will affect conditions.”
He further added:
“The machinery market appears to be experiencing more challenging conditions than manufacturing overall, as global uncertainty leads to caution around investment in equipment.”
Data from the Federal Reserve in October revealed that U.S. industrial production dropped in September, largely due to reduced factory output influenced by a strike at Boeing Co. and the impact of two hurricanes. Production across factories, mines, and utilities declined by 0.3%, following a revised 0.3% increase in the previous month. However, the industrial sector of the broader market has risen by 22.4% since the beginning of the year.
Methodology:
We sifted through holdings of Industrial Machinery ETFs and online rankings to form an initial list of 20 industrial machinery stocks. Then we selected the 10 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024, according to Insider Monkey’s database. We have used the stock’s revenue growth (year-over-year) as a tiebreaker in case two or more stocks have the same number of hedge funds invested.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
A combine harvesting crops, showing the capabilities of the company’s agriculture equipment.
Deere & Company (NYSE:DE)
Number of Hedge Fund Investors: 50
Revenue Growth Rate (year-over-year): 16.47%
Deere & Company (NYSE:DE) is the world’s largest producer of agricultural equipment, manufacturing some of the most recognizable machines in the heavy machinery business in green and yellow. John Deere Capital, small agriculture and turf, construction and forestry, and production and precision agriculture are the company’s four reportable segments. More than 2,000 dealer sites in North America and over 3,700 dealer locations worldwide contribute to its vast dealer network, which makes its products accessible. John Deere Capital offers retail financing for machinery to its clients as well as wholesale finance for dealers, which raises the potential for Deere product sales.
Deere & Company (NYSE:DE) provides a wide range of construction and agricultural equipment to its customers. According to analysts, it will remain the industry leader in agriculture and a major force in construction. The company’s dominant brand recognition stems from its more than 100 years as the leading producer of mission-critical agricultural equipment. Deere’s superior, incredibly long-lasting, and effective goods are the foundation of its powerful brand. Its ability to reduce total costs of ownership through productivity and other efficiency improvements is highly valued by customers in developed markets.
Following a discussion with management, JPMorgan analyst Tami Zakaria increased the company’s price target from $360 to $420 on October 11, 2024, and maintained a Neutral rating on the shares. Deere & Company (NYSE:DE) is expected to release fiscal 2025 guidance bracketing consensus, which is higher than the bear’s estimate of mid-teen earnings per share, according to the firm. It believes that if retail sales in Brazil stabilize and North America doesn’t continue to deteriorate, the current consensus predictions for fiscal 2025 would be attainable.
Parnassus Core Equity Fund stated the following regarding Deere & Company (NYSE:DE) in its Q2 2024 investor letter:
“Deere & Company (NYSE:DE) stock dropped after the company released underwhelming fiscal second-quarter earnings and lowered its 2024 guidance. Although the company is going through an equipment demand downturn, we believe it will demonstrate better-than-expected through-cycle performance.”
Tom Gayner’s Markel Gayner Asset Management was the company’s largest stakeholder at the end of Q2 2024, as per Insider Monkey’s database. It owns 869,100 shares worth $362.70 million as of Q2.
Overall DE ranks 5th on our list of the best industrial machinery stocks to buy now. While we acknowledge the potential of DE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.