As Russian forces continue to penetrate Ukraine, wheat prices climbed to a 14-year high on Friday – a development that will benefit the U.S. agriculture equipment manufacturer, Deere & Company (NYSE: DE), says Jefferies Stephen Volkmann.
Volkmann has a $450 price target on Deere & Company
The forecast is already reflecting in the stock with shares up more than 5.0% since Thursday morning when Russia launched a special military operation in Ukraine. On CNBC’s “The Exchange”, Volkmann said:
Russia and Ukraine are key producers of Wheat. The crisis will make the global markets tighter and obviously result in higher prices. Higher prices attract investment. The only way to cure higher prices is more production. That’s going to require more equipment.
The senior machinery analyst at the independent investment bank has a price a price target of $450 on DE that represents a 30% upside from here. Last week, Deere reported Q1 earnings that easily topped estimates. The stock trades at a PE multiple of 19.23 at present.
Ukraine is more than just a beneficiary of the Ukraine crisis
Interestingly, however, Volkmann is convinced the Ukraine crisis is not the only tailwind for Deere. In fact, there are trends that make the stock particularly lucrative for the long-term investors, he added.
Deere is a great long-term story. This Ukraine situation is more near-term. But, there’s big trends at Deere’s back, including technology. We think the tightness in global markets for crops is with us for quite a while due to climate change and so forth. So, Deere has a lot more going for it.
Deere generates roughly 25% of its business from the energy markets. The tightness in oil and gas, therefore, could also be a catalyst for the stock, Volkmann concluded, who also has a positive view on the likes of Caterpillar and Cummins.
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