Deere & Company (NYSE: DE) is up over 40% for the year, and at a record high, so it’s only logical to be cautious at this point. But there are a lot of smart investors who think that there’s reason to believe the stock can go even higher. Here’s why.
That record high was achieved by breaking out of a trading range that had been in place for the last five years, which is a significant technical achievement. As always, when a stock price has broken through its ceiling, investors believe it will float higher more easily than before.
The Agricultural industry has been in a downward cycle for the last several years, which has resulted in share price underperforming as compared to the S&P 500. But the consensus now seems to be that there is evidence to support the view that 2017 will see support to a bottom of that cycle and agricultural equipment in general will be on the upswing.
In fact, it is believed that other cyclical industries have found a bottom, as well, such as infrastructure, mining, oil and gas. This is significant, because individual stocks will often get swept higher with its industry when businesses have no company-specific troubles holding them back. So when the Manufacturing – Farm Equipment sector starts looking better, so does Deere.
Innovation & Diversification
While it is easy to see how Deere share price has tracked its industry, there are important factors which take more than a cursory glance to discover. Deere has been making an investment in the technology which could set them apart from competition and, at least as important, making it less dependent on its industry sector.
Those two efforts are expected to yield higher revenues, and more stability when the next downward cycle comes around.
Just in the last month, analysts have been revising earnings estimates upward in a manner that suggests they are definitely more bullish about Deere’s future, both short and long-term.