With inflation pushing food prices ever higher, agricultural companies are coming to the rescue with better machines and greater efficiency. Hopefully, by producing more food at a lower cost, inflation can cool, and prices stabilize. The Fed raising interest rates isn’t the only way inflation can come down.
Farming has never been more mechanized than it is today. And this trend toward mechanization will only increase in the future. Many of the top industrial stocks are heavily reliant on agribusiness. And the growth in machinery stocks is likely to continue as long as the population keeps growing as well.
In addition to the growing population and rising prices, sustainability and waste have become key topics of discussion. Many governments have shown concern over emissions and waste produced by farming activities. Farms and farmers, in turn, may need to reduce their emissions and waste or face fines and regulations. But the best machinery stocks are already working on solutions to these problems with precision agriculture and precise equipment control.
Overall, farms and farming face several challenges, but those challenges are opportunities for agricultural and machinery stocks. The companies that can meet these challenges and help farmers produce more food, with fewer inputs, in a more sustainable way will have enormous gains in the future. So here are some of the best agricultural and machinery stocks to watch.
Deere and Company (DE)
Deere (NYSE:DE) has been a renowned name in agricultural machinery for over a century. And despite being an old company, they make far more than just plows and tractors. Deere has become a leader in precision agriculture, letting farmers do more with less. Precision agriculture will be key in the coming years. As resources become more scarce while the population grows ever larger, precision agriculture will be necessary to keep everyone fed.
Deere has also been expanding through acquisitions. They have purchased full control of some joint ventures they made with Hitachi (OTCMKTS:HTHIY). And have acquired a majority stake in battery technology company Kreisel. The expansion, and expansion into newer areas of technology, is a strong factor in their continued growth.
Despite recent fluctuations in stock price, Deere has had an impressive 2023 in financial terms. Deere beat earnings and raised guidance recently, with a year-over-year revenue and net income growth of 30% and 36%, respectively. Total revenue went from $13.3 billion to $17.3 billion, while net income went from $2.1 billion to $2.9 billion. Deere is showing its ability to grow rapidly and profitably. And their continued leadership in the technology parts of agribusiness makes them a good bet for the future as well.
The bottom line is that agriculture will need to continue to adapt in the face of increasing population and resource depletion. Deere is positioning itself well to reap the benefits of that adaptation. And that makes them one of the top agricultural machinery stocks to buy.
Caterpillar (NYSE:CAT) sells heavy machinery for nearly every major industry. They are a visible leader on construction sites for buildings, roads, and everything in between. They are a leader in mining and energy. And they are also a major agriculture machinery stock that should definitely be on your watchlist.
Caterpillar is an exciting stock in part because of their movement toward electric vehicles (EVs). They have recently created a first-of-its-kind electric mining truck, for instance. And have previously rolled out electric excavators. As a major farming manufacturer, Caterpillar is poised to bring such vehicles to farms as well. One of the common problems with modern EVs is range anxiety. But most farming equipment won’t travel hundreds of miles from home, so range anxiety will be less important. If EVs truly are the future, Caterpillar’s move is placing them as one of the best machinery stocks to buy.
Caterpillar has seen strong growth recently, according to their latest earnings report. Revenue grew from $13.6 billion to $15.86 billion, while profit grew from $1.53 billion to $1.94 billion. They have also increased their dividend, making them more attractive to value investors.
Machinery is a business where innovation is key, just like any other industry. World leaders committed to net zero have favored farmers to reduce their emissions. The pressures of regulation and potential tax could lead many farmers towards electric vehicles. And that could make Caterpillar a top industrial stock of the future.
AGCO (NYSE:AGCO) is a big global agricultural machinery industry player. As the world’s third largest agriculture machinery manufacturer, AGCO is growing to quickly rival its much older competitors.
AGCO’s standout feature is its involvement in smart farming. For example, they are developing advanced smart spraying solutions through a joint venture with Bosch and BASF. These solutions will help to optimize crop protection practices and use fewer chemicals. AGCO’s Fuse smart farming solution also lets farmers maximize productivity while minimizing resource usage. A key goal of sustainable agriculture.
Despite or perhaps because it is a younger player, AGCO has rapidly gained traction through its ability to innovate. AGCO has incorporated the Internet of Things (IoT) into its machinery, enabling increased accuracy and precision in farming operations. This integration of technology enhances efficiency, productivity, and yield potential for farmers.
AGCO’s most recent earnings report showed its potential for rapid growth. They beat EPS earnings estimates by 30%, with net sales of $3.3 billion (up 24% from $2.69 billion a year ago) and net income of $232.6 million (up 53% from $152 million a year ago). Smart and sustainable agriculture will be key to reducing emissions and producing more with less (which will also help with inflation). AGCO has shown it can be a key player in the industry and is easily one of the best agricultural machinery stocks to buy.
On the date of publication, John Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.