Deere & Company (DE), AGCO Corporation (AGCO): You Are Probably Missing the Big Opportunity in This Stock

The opportunity ahead
The markets have been wary that the recent plunge in crop prices could hurt farm receipts, which, in turn, could lower demand for Deere & Company (NYSE:DE)’s farm equipment next year. While lower crop prices are a concern, projected bumper production (link opens as PDF) of essential crops like corn and soybeans this year would mean higher sales volumes for farmers, which could help offset lower selling prices. Last year, crop prices were at their peak, but the drought hurt crop yields significantly. Yet, U.S. farm cash receipts hit an all-time high, thanks largely to crop insurance claims filed by the farmers.

More importantly, international markets will play an increasingly important role for Deere & Company (NYSE:DE) in the future. The company aims to gets half of its revenue from markets outside the U.S. and Canada by 2018, up from 38% last year. The Brazilian markets, in particular, look promising — tractor penetration there is still low despite a booming agriculture sector. Robust demand from South America helped Deere’s international sales improve 9%  year over year during the last quarter.

Deere & Company (NYSE:DE)’s solid brand image makes it easier for the company to strengthen its foothold in the fast-growing markets like Brazil, China, and India. An increasing global presence should pay off handsomely in the future.

What you should plan next
I think Deere & Company (NYSE:DE) is a great company with a solid business line, efficient management, and strong financials. It is also committed to increasing shareholder value: It has a solid return on equity of 43%, has increased

its quarterly dividends by 82% since 2010, and has bought back shares every year since 2004. I’ll give you a more detailed analysis of Deere & Company (NYSE:DE)’s capital allocation strategies soon. Until then, I think long-term investors should plan to build a position in this stock.

The article You Are Probably Missing the Big Opportunity in This Stock originally appeared on Fool.com and is written by Neha Chamaria.

Fool contributor Neha Chamaria has no position in any stocks mentioned, and neither does The Motley Fool.

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