There’s no doubt you’re familiar with the driverless vehicle revolution. But what you might not know is that one surprising company has taken a commanding lead in this space.
Now, this isn’t some flash in the pan company. It’s actually been in business for over 180 years.
Its long tradition as one of the most trusted names in its field hasn’t stopped it from embracing new technology, though. And it’s not just tinkering with driverless technology for applications in the future.
Autonomous vehicles are generating a significant portion of this firm’s revenue today.
In fact, these vehicles might be more revolutionary than those Elon Musk is trying to build. That’s because the industries using them have such a profound impact on our economy as a whole – more so than the cars people drive to work and back.
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And while driverless technology has already given this stock a good run of success – it gained 52% in 2017 – our Money Morning Stock VQScore™ system just gave it a top score. That shows that there are still more gains to come from this tech leader.
Though “tech leader” might not be the first thing you’ll think of when you hear the name…
How Two Decades of R&D Are Paying Off in Spades for This Iconic Vehicle Maker
Deere & Co. (NYSE: DE) was founded in 1837 in Illinois, where it’s still based nearly two centuries later.
No doubt you’ll recognize the company’s iconic green tractors and mowers, not to mention its construction and forestry equipment. But today’s John Deere vehicle has come a long way from the one your parents knew – not to mention from the plow its founder first made using a broken saw blade.
“We kind of laugh when we see news stories about self-driving cars, because we’ve had that for years,” Jason Poole told The Washington Post in 2015.
Poole owns a small family farm in Kansas. Thanks to driverless technology, he doesn’t have to spend hours on a tractor. Instead he drives the first curved row on the hilly terrain – to teach the lay of the land – and then lets the machine do the rest.
It took the better part of 20 years, going back to the 1990s, for Deere to get this technology to where it is now. In spite of some fits and starts along the way, the company is now focused on automation that goes far beyond just driving.
Some of Deere’s vehicles have the ability to collect information about production and soil quality, analyze that data, and make adjustments to changing crop conditions. And thanks to advanced communications technology, all that information can be coordinated to improve agricultural operations on a worldwide scale.
Automation technology also allows farmers to treat each individual plant differently. When controlling for weeds, for example, farmers used to have to spray herbicide across a whole field. But in 2017, Deere acquired Blue River Technology, which manufactures hardware to spray exactly where it’s needed. Not only does this save money on herbicide, it also makes the offending weeds less likely to develop a resistance.
Savvy moves like the Blue River acquisition “should help Deere remain at the forefront of what’s known as precision agriculture,” says Money Morning Defense and Tech Specialist Michael Robinson.
Deere isn’t done innovating either. It raised research and development spending by approximately 20% in 2018, keeping it near 5% of net sales.
While the company has been a dominant force in agriculture for the last 180 years, it has already laid the groundwork to be an industry leader for the next 180 years too.
Best of all, you can catch the market sleeping if you grab it right now.
Now Is the Time to Buy DE
Deere shares were up and down for much of 2018 and are now near where they were 12 months ago. That’s partly due to the effect of the Trump administration’s tariffs and lower-than-expected earnings.
But if we take a step back and look at the big picture, it’s easy to see the value the market is missing.
Deere’s sales have risen more than 40% over the last two years, from $26.5 billion to $37.3 billion. And net income in that time has risen an even more impressive 55.5%, from $1.5 billion to $2.4 billion.
Earnings per share (EPS) was up 17.5% in the most recent quarter from a year earlier. And according to FactSet, EPS is projected to rise 34.4% over the next two years.
Deere also improved its operating cash flow to $3.3 billion in 2018, up from $2.4 billion the year before.
So it’s no wonder that a majority of analysts tracked by FactSet call DE a “Buy” or “Overweight.”
The company’s board obviously knows how valuable its stock is, too, as is evident from its aggressive share buyback program. Since 2004, Deere has reduced its outstanding shares by 36%.
As this stock gets scarcer, you’re going to want to be one of the lucky few holding onto it as Deere leads the way to the next generation of artificial intelligence and agriculture.
Plus, you’ll get to collect a 1.9% dividend yield on top of it.
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