Deere & Company and CNH Industrial N.V. are two titans in the agricultural machinery sector, with Deere holding the top position globally. Both companies also have a significant presence in the construction equipment market, offering investors exposure to long-term trends such as precision farming, automation, and infrastructure development. However, with the current softness in both agricultural and construction markets, coupled with tariff concerns, investors may be wondering which stock is the better choice for their portfolio.
**Fundamentals and Growth Prospects**
Deere, renowned for its green tractors, boasts a market capitalization of $139 billion. The company specializes in agricultural, forestry, and turf equipment, with a strong foothold in precision farming technology and construction equipment. However, Deere has faced headwinds, with revenues declining for seven consecutive quarters and earnings slipping in the last six. The company anticipates these challenges to persist in fiscal 2025, with declines expected across various markets. Despite these near-term challenges, Deere is well-positioned for long-term growth, driven by consistent investments in innovation and geographic expansion. The company’s focus on advanced technologies and features provides it with a competitive edge.
CNH Industrial, with a market capitalization of approximately $16 billion, operates well-known agricultural equipment brands such as New Holland, Case IH, and STEYR. Like Deere, CNH has faced persistent challenges, with revenues and earnings declining over the past several quarters. For 2025, the company anticipates continued weakness in both its Agriculture and Construction segments. However, CNH is making strategic strides in automation, autonomy, digital integration, alternative fuels, and electrification to strengthen its presence in the precision technology space. The company’s recent product launches feature in-house digital systems that improve operational efficiency and enhance its competitive position.
**Market Performance and Valuation**
Year to date, Deere stock has gained 21.2%, outperforming the Zacks Manufacturing – Farm Equipment industry’s growth of 19.7%. CNH, however, has lagged behind both Deere and the industry at 15%. Despite this, both stocks have outperformed the Industrial Products Sector’s rise of 3.2% and the S&P 500’s gain of 4.4%. Deere is currently trading at a forward 12-month earnings multiple of 24.49X, higher than its five-year median. In contrast, CNH Industrial stock is trading at a forward 12-month earnings multiple of 17.71X, which is higher than its five-year median but at a discount to the industry average, the sector’s average, and the S&P 500’s average.
**Implications for Investors**
Both Deere and CNH Industrial are facing near-term headwinds, reflected in their recent earnings results and downward estimate revisions. Sluggish demand in both the agriculture and construction sectors continues to weigh on their performance. However, from a long-term perspective, both stocks are fundamentally tied to global megatrends such as rising food demand, advancements in agricultural technology, and increased infrastructure investment.
From a valuation standpoint, CNH appears more attractive currently, boasting a cheaper valuation and a better Value Score compared to Deere. However, both companies currently have a Zacks Rank #3 (Hold), making the choice between the two stocks a challenging task for investors. As always, investors should conduct thorough research and consider their investment goals and risk tolerance before making any investment decisions.