We can also compare Deere to Caterpillar Inc. (NYSE:CAT) and to CNH Global NV (NYSE:CNH). Caterpillar seems to be suffering from reduced demand for construction and mining equipment, with double-digit percentage declines in both revenue and net income last quarter compared to the first quarter of 2012. The stock is down 2% in the last year against a rising market as a result, which has brought the stock’s dividend yield close to 3% at current dividend levels and its trailing P/E to 11- a small premium over Deere. Still, we think that we’d avoid it at least for now. In quantitative terms CNH looks quite cheap, with trailing and forward earnings multiples of 8 and with a five-year PEG ratio of 0.7. The company has been seeing slight revenue growth, and somewhat wider margins, though we would warn investors that statistically CNH is highly correlated with market indices as the stock’s beta is 2.7.
We’d be interested in looking into Lindsay and trying to understand what the bear case for the stock is, though compared to AGCO we think that we would prefer Deere on the basis of better recent results and a somewhat better brand name. We also would call CNH at least a prospective value stock, and if its business continues to hold up it would be worth considering at these prices.
Disclosure: I own no shares of any stocks mentioned in this article.