Following a few years of above-average inflation, some food items remain at a premium. Thanks to poor weather, crops such as cocoa and coffee have jumped to all-time highs. Other agricultural crops have also held up well.
These higher prices provide farmers with the capital that they may need to make improvements on their farms. That can include investing in newer technologies to better farm more efficiently and increase their productivity and output.
That trend could benefit Deere & Company (DE). Shares have been in an uptrend over the past few years as crop prices have been moving higher, and the latest earnings show that there’s more room to run.
Over the past year, Deere has struggled, with revenues down 30% and earnings growth shrinking by 50%. But the latest quarterly data suggests a turnaround, which could help boost shares even further. Deere is fairly priced at about 25 times earnings.
Action to take: With strong earnings and shares trending higher, Deere is a solid momentum stock for investors here, and can likely continue to trend higher in the quarters ahead.
Deere also pays a 1.3% dividend, which it has a history of raising over time.
For traders, with shares breaking higher, the June $530 calls, last trading for about $18.50, could see mid-to-high double-digit returns.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.