Deere & Co. (DE) is an iconic stock. The hit country song “Way Out Here” by Josh Thompson contains the lyric: We’re about John Wayne, Johnny Cash and John Deere.  Placed among that group, you can see how firmly ingrained the farm equipment maker is into the American psyche. On May 19, Deere & Co. showed just how powerful its brand is, as Deere earnings were just released for the company’s most-recent quarter.  

While there’s no denying the cultural prominence of the John Deere brand, the question for investors is whether shares of the manufacturer of those iconic green-and-yellow tractors and combines deserve to be included in your portfolio?  Here are five reasons to buy a DE stock.

• Deere boasts strong current earnings.  Deere’s latest earnings report was very stellar, with the company boosting profits 16% in fiscal Q2.  The Moline, Ill.-based firm said it earned $547.5 million, or $1.28 per share, in the quarter ended April 30.  That’s a big gain over the $472.3 million, or $1.11 per share, earned in the same period last year.  The results would have been ever stronger, save for a charge taken in the quarter related to the ObamaCare legislation.  Excluding the charge, profit would have been $1.58 per share.  Revenue in the period also grew, rising 6% year-over-year to $7.13 billion.  The company easily bested consensus forecasts on both the bottom- and top-line.
• DE stock to benefit as global agricultural demand rises.  According to Deere, the company saw a marked increase in demand for combines and large tractors, particularly from agricultural powerhouse nations like Argentina, Brazil, Canada and the U.S. and Canada.  The company saw net sales in the U.S. and Canada jump by 4%, while total sales outside the two countries rose 9% in the quarter.
• Deere & Co has strong global sales forecast.  Deere said it expects sales for the full fiscal year to rebound nicely, estimating sales growth of between 11% and 13%, and net income to be as high as $1.6 billion. In the fall of 2009, Deere estimated net income of just $900 million for fiscal 2010. In February it raised that forecast to $1.3 billion, and even though some analyst have said the company is being too conservative, the clear upward revision of these estimates bodes well for the company’s bottom line—and likely its stock price.
• DE stock lifted by improving U.S. farm conditions.  American farmers have struggled over the past several years, as the global economic downturn put pressure on the “bread basket” of the world.  Now, however, conditions are really starting to improve.  Deere estimates that U.S. farmers will collectively generate net income of $81.5 billion in 2010.  That number represents a solid increase over last year’s $70.9 billion estimate.  These improved conditions will undoubtedly lead to more equipment purchases, and that could translate into a nice boost for Deere.
• Deere anticipating improving construction conditions.  Building and construction was perhaps the hardest hit sector during the recession, but as the global economy improves, big construction projects are likely to begin again.  In fact, Deere now estimates that sales of construction equipment will grow by 30% worldwide in 2010 compared with the historic recession lows seen in 2009.  If we do see this kind of recovery in construction spending, we’d also likely see a sharp increase in Deere’s top and bottom lines.

As the world’s largest maker of agricultural equipment, and as a big player in the construction, forestry and landscaping equipment markets, Deere is poised to benefit from economic improvement on multiple fronts.  For these reasons and more, it could indeed be time for investors to buy a Deere.

As of this writing, Jim Woods did not own a position in any of the stocks mentioned here.

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