John Deere Beats on Q1 Earnings, Raises View: 5 ETFs to Buy
Before the opening bell on Feb 17, the world’s largest agricultural equipment maker under the iconic John Deere brand, Deere & Co DE, reported robust first-quarter fiscal 2023 results, beating estimates on both the top and bottom lines. The company offered a bullish outlook for the fiscal year.
As a result, shares of Deere climbed 7.5% on the day. Investors could easily tap the strength through ETFs with the largest allocation to this farm equipment giant. These funds — iShares MSCI Agriculture Producers ETF VEGI, First Trust Indxx Global Agriculture ETF FTAG, VanEck Agribusiness ETF MOO, VanEck Natural Resources ETF HAP and VanEck Future of Food ETF YUMY — seem compelling choices to play the earnings strength.
Earnings per share came in at $6.55, well above the Zacks Consensus Estimate of $5.53 and up a whopping 124% from year-ago earnings. Equipment revenues increased 34% year over year to $11.7 billion and beat the Zacks Consensus Estimate of $11.3 billion. Robust results were fueled by strong demand for its high-horsepower tractors and an uptick in spending from construction customers (read: 4 ETFs to Tap on Solid Q4 GDP Numbers).
The farm equipment giant is looking forward to another strong year on the basis of positive fundamentals, low machine inventories, and a continuation of solid execution. For fiscal 2023, the company guided net income of $8.75-$9.25 billion.
Production and precision agriculture sales are projected to grow 20% as farmers focus on wasting as little of their inputs as possible amid rising prices. Construction and forestry sales are expected to grow 10-15% and small agriculture and turf equipment sales are likely to grow as much as 5%. The construction and forestry division is benefiting from healthy demand, with order books full into the fourth quarter.
iShares MSCI Global Agriculture Producers ETF (VEGI)
iShares MSCI Agriculture Producers ETF provides global exposure to the companies that produce fertilizers and agricultural chemicals, farm machinery, packaged foods and meats by tracking the MSCI ACWI Select Agriculture Producers Investable Market Index. Holding 162 stocks in its basket, Deere takes the top spot at 21.9% share. American firms account for 60% of the assets, while Canada, Norway and Japan round off the next three spots.
iShares MSCI Agriculture Producers ETF is less popular and illiquid, with $284.5 million in AUM and around 72,000 shares in an average daily volume. It charges 39 bps in fees per year from investors (see: all Materials ETFs here).
First Trust Indxx Global Agriculture ETF (FTAG)
First Trust Indxx Global Agriculture ETF follows the Indxx Global Agriculture Index, which is a market-capitalization weighted index designed to measure the performance of companies, directly or indirectly engaged in improving agricultural yields. It holds 51 stocks in its basket, with John Deere occupying the second position at 9.5%. From the perspective of industrial exposure, materials takes the largest share at 52.4%, followed by 27.7% in industrials and 10.3% in healthcare. Here again, the United States is the top country with a 32.8% share, while Germany takes a 19.3% share.
First Trust Indxx Global Agriculture ETF is an overlooked ETF, having accumulated $23.9 million in AUM and trading in an average daily volume of about 4,000 shares. It charges 70 bps in annual fees.
VanEck Vectors Agribusiness ETF (MOO)
VanEck Agribusiness ETF is by far the most popular choice in the space, with an AUM of about $1.3 billion and an average daily volume of 80,000 shares. It tracks the MVIS Global Agribusiness Index, which offers exposure to companies, involved in agri-chemicals, animal health and fertilizers, seeds and traits, farm/irrigation equipment and farm machinery, aquaculture and fishing, livestock, cultivation and plantations, and trading of agricultural products.
VanEck Agribusiness ETF holds 52 securities in its basket, with John Deere capturing the third position with a 7.4% share. It charges 52 bps in annual fees.
VanEck Vectors Natural Resources ETF (HAP)
With AUM of $144.8 million, VanEck Natural Resources ETF offers exposure to companies that are involved in the production and distribution of commodities and commodity-related products and services in the following sectors — Agriculture, Alternatives (Water & Alternative Energy), Base and Industrial Metals, Energy, Forest Products, and Precious Metals. It tracks the VanEck Natural Resources Index, holding 430 stocks in its basket. John Deere takes the top spot at 5.5% of the assets. Here too, American firms dominate the portfolio with nearly 48.5% share, and materials is the top sector with 36.6%.
VanEck Natural Resources ETF charges 49 bps in annual fees and trades in an average daily volume of 14,000 shares (read: ETF Laggards of 2022 That Are Leading This Year).
VanEck Future of Food ETF (YUMY)
VanEck Future of Food ETF is an actively managed ETF that seeks long-term capital appreciation by investing in companies engaged in Agri-Food technology and innovation which encompasses industries and companies that are leading, enabling, supplying, disrupting, or benefiting from new environmentally sustainable agriculture and food products and services. It holds 39 stocks in its basket, with Deere taking the second spot at 5.5%. American firms dominate the portfolio with a 55.7% share.
VanEck Future of Food ETF has been able to manage $3.7 million in its asset base while trading in a volume of 1,000 shares per day on average. It charges 69 bps in fees per year.
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Deere & Company (DE) : Free Stock Analysis Report
VanEck Agribusiness ETF (MOO): ETF Research Reports
iShares MSCI Agriculture Producers ETF (VEGI): ETF Research Reports
VanEck Natural Resources ETF (HAP): ETF Research Reports
First Trust Indxx Global Agriculture ETF (FTAG): ETF Research Reports
VanEck Future of Food ETF (YUMY): ETF Research Reports
