Cramer explains why he’s bullish on Deere stock


Farmer Roger Hadley harvests corn from his fields in his John Deere combine in this aerial photograph taken over Woodburn, Indiana.

Bing Guan | Reuters

CNBC’s Jim Cramer is bullish on Deere after the company reported strong fiscal second-quarter results last Friday.

“Some analysts want to cycle out of it. If you go over the [Deere] conference call, you’ll see that this is a cycle, and this cycle has more legs versus typical cycles,” Cramer said on “Squawk on the Street.”

“You know these [agricultural] cycles when they get going. I’m not calling them a super cycle, but when they get going, it’s very hard to stop them until there’s a massive amount of planting. May be the best [agricultural] cycle ever,” the “Mad Money” host said.

Shares of the farm equipment manufacturer rose about 1% on Friday after beating on the top and bottom lines of its quarterly results. Deere reported earnings of $5.68 per share on revenue of $11 billion. Wall Street forecast earnings of $4.52 per share on revenue of $10.44 billion, according to Refinitiv. The shares were down slightly on Monday, but are still up more than 32% this year and over 150% in 12 months.

Price for corn futures are up more than 35% this year and soybean futures are up 15% this year, although soft commodities have been weak a bit in the last week.

“In the Deere call…you do get the sense that farmers are buying like mad. You know what happens when the farmers buy like mad? They plant like mad. So within a few months, futures trade down on that,” Cramer said.

Some investors view Deere as a hybrid of industrials and tech, including high-profile investor Cathie Wood of ARK Invest, who added Deere to the firm’s ARKQ autonomous technology and robotics ETF.

“It’s investments into agrotech are very real and could be transformational for this company,” Gina Sanchez, CEO of Chantico Global, told CNBC’s “Trading Nation” on Thursday. “They’re allowing farmers to do precision farming, not just getting the seeds in the ground as fast as possible but putting them in the right place where they have the best chance at growing.”

Other investors view Deere primarily as a cyclical stock.

“I fall into the camp where Deere is still an industrial stock, which means it’s still a cyclical stock, and investors look to buy at the beginning of the cycle and sell somewhere at the middle to the end of or the later part of the cycle,” Michael Binger, president of Binger Investments told CNBC on Thursday. “So, I think Deere is doing well in the near term, but you need to be careful.”

Shares of Deere last traded 0.7% lower at $357.45 on Monday.



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2021-05-24 15:00:24

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