Deere shares are a ‘buy’ amidst food price inflation: Gina Sanchez

on Jul 29, 2022
  • Gina Sanchez builds a bull case around Deere & Company on CNBC.
  • Wall Street currently has a consensus "overweight" rating on Deere shares.
  • Deere is expected to see a 24% increase in top and bottom line this quarter.

Deere & Company (NYSE: DE) is a great pick amidst the Ukraine war and food inflation that topped 10% last month, says Gina Sanchez. She’s the CEO of Chantico Global.

Deere shares have been resilient this year

Deere shares are down only 2.0% this year – an accomplishment considering the broader market is still down about 15%. Making her bull case on CNBC’s “The Exchange”, Sanchez said:

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Because food prices are high, farmers are making tons of money. And when you see big farm receipts, the next year you see big tractor buying. This is huge for John Deere; it has the best tech options for the farmers.

In May, Deere forecast continued demand for farm equipment and raised its full-year guidance. It now expects to earn up to $7.40 billion this year.  

Deere shares are trading at a PE multiple of 17.90 at the time of writing, versus an average of 21.79 over the past five years.

Wall Street is ‘overweight’ Deere stock

Consensus is for the industrial firm to see about a 24% increase in the top and bottom line this quarter. More importantly, though, Sanchez says “AgTech” is just as pivotal in this environment as energy.

Deere’s been focused on building tractors that can evaluate where to plant seeds for best crop yields. If Ukraine continues to be a war zone, “ag” play is equally catastrophic to inflation story. So, farmers must be able to get the best yields.

The global precision agriculture market is expected to grow at a CAGR of 11.4% and more than double in size from 2022 through 2028; and “DE” sits right at the heart of that growth.

Wall Street currently has a consensus “overweight” rating on the stock with upside to $389 on average.

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