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The Zacks Manufacturing - Farm Equipment industry has been grappling with lackluster demand, lower commodity prices and uncertainty regarding the U.S-China Phase one trade agreement on account of the coronavirus pandemic. However, improving farm income will spur agriculture-equipment demand.
Coronavirus Outbreak & Trade War Woes
Bleak demand in China is likely to depress agricultural commodity prices in the near term, while the coronavirus crisis might hurt U.S agricultural exports, which are already plagued by trade disputes between the United States and China.
Dairy and livestock farmers have been adversely impacted by lower milk and protein prices, as demand is being hurt by the closure of schools and restaurants, overall disruption to the food-supply chains and near-term changes in food-consumption trends. The consumption of grain for food, fuel and livestock feed has been affected by the economic constraints caused by the pandemic. As a result, grain inventories are expected to increase, which will further lower commodity prices.
Per the U.S.-China Phase one trade deal, China had pledged to increase purchases of agricultural products by $32 billion over a two-year period. Nevertheless, the COVID-19 outbreak has raised concerns whether or not China will be able to honor its commitment to purchase U.S. farm products. China has asked its state-owned firms to halt the purchases of soybeans and pork from the United States, which further aggravates the U.S-Sino trade deal.
Major industry players like Deere & Company (DE - Free Report) and AGCO Corporation (AGCO - Free Report) have reduced their operations and in some cases, suspended the same, primarily due to supply-chain constraints, workforce limitations, safety-equipment availability and government restrictions. These measures are likely to dent the industry’s performance.
The Zacks Manufacturing - Farm Equipment industry has gained 10.1% over the past year compared with the S&P 500’s growth of 12.6%. The industry falls under the Zacks Industrial Products sector, which has been up 3.2% during the same time period.
The industry currently carries a Zacks Industry Rank #151, which places it at the bottom 40% of the 253 Zacks industries. The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, suggests gloomy prospects for the days to come. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Improving Farm Income & Precision Farming Hold Promise
The $16-billion COVID-19 aid package by the U.S. Department of Agriculture (USDA) for U.S. farmers and livestock producers is likely to offset some of the impact of lower commodity prices, while lower fuel and fertilizer costs will help sustain the industry margins. Per the USDA's report, net farm income is anticipated to be up 3.3%, year on year, to $96.7 billion in 2020. Improving farm income will enable farmers to invest in equipment purchases. Additionally, planted acres for soybeans are likely to rebound this year, while corn acres are projected to be at the highest level since 2012.
Apart from this, with customers increasingly relying on advanced technology, companies in the industry are now enhancing their precision-farming capabilities, in order to keep up with the evolving demands. Also, farm equipment demand will be fueled by the replacing demand for age-old equipment. Initiatives to expand in the precision agriculture technology will be a game changer for industry players.
Kubota has an estimated long-term earnings growth rate of 4.6%. The Zacks Consensus Estimate for Lindsay’s fiscal 2020 earnings indicates a year-over-year surge of 80.6%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth. Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Low Commodity Prices, Coronavirus Woes Hurt Farm Equipment Makers
The Zacks Manufacturing - Farm Equipment industry has been grappling with lackluster demand, lower commodity prices and uncertainty regarding the U.S-China Phase one trade agreement on account of the coronavirus pandemic. However, improving farm income will spur agriculture-equipment demand.
Coronavirus Outbreak & Trade War Woes
Bleak demand in China is likely to depress agricultural commodity prices in the near term, while the coronavirus crisis might hurt U.S agricultural exports, which are already plagued by trade disputes between the United States and China.
Dairy and livestock farmers have been adversely impacted by lower milk and protein prices, as demand is being hurt by the closure of schools and restaurants, overall disruption to the food-supply chains and near-term changes in food-consumption trends. The consumption of grain for food, fuel and livestock feed has been affected by the economic constraints caused by the pandemic. As a result, grain inventories are expected to increase, which will further lower commodity prices.
Per the U.S.-China Phase one trade deal, China had pledged to increase purchases of agricultural products by $32 billion over a two-year period. Nevertheless, the COVID-19 outbreak has raised concerns whether or not China will be able to honor its commitment to purchase U.S. farm products. China has asked its state-owned firms to halt the purchases of soybeans and pork from the United States, which further aggravates the U.S-Sino trade deal.
Major industry players like Deere & Company (DE - Free Report) and AGCO Corporation (AGCO - Free Report) have reduced their operations and in some cases, suspended the same, primarily due to supply-chain constraints, workforce limitations, safety-equipment availability and government restrictions. These measures are likely to dent the industry’s performance.
The Zacks Manufacturing - Farm Equipment industry has gained 10.1% over the past year compared with the S&P 500’s growth of 12.6%. The industry falls under the Zacks Industrial Products sector, which has been up 3.2% during the same time period.
The industry currently carries a Zacks Industry Rank #151, which places it at the bottom 40% of the 253 Zacks industries. The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, suggests gloomy prospects for the days to come. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Improving Farm Income & Precision Farming Hold Promise
The $16-billion COVID-19 aid package by the U.S. Department of Agriculture (USDA) for U.S. farmers and livestock producers is likely to offset some of the impact of lower commodity prices, while lower fuel and fertilizer costs will help sustain the industry margins. Per the USDA's report, net farm income is anticipated to be up 3.3%, year on year, to $96.7 billion in 2020. Improving farm income will enable farmers to invest in equipment purchases. Additionally, planted acres for soybeans are likely to rebound this year, while corn acres are projected to be at the highest level since 2012.
Apart from this, with customers increasingly relying on advanced technology, companies in the industry are now enhancing their precision-farming capabilities, in order to keep up with the evolving demands. Also, farm equipment demand will be fueled by the replacing demand for age-old equipment. Initiatives to expand in the precision agriculture technology will be a game changer for industry players.
Investors interested in the industry can consider Kubota Corporation (KUBTY - Free Report) and Lindsay Corporation (LNN - Free Report) , both currently carrying a Zacks Rank of 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Kubota has an estimated long-term earnings growth rate of 4.6%. The Zacks Consensus Estimate for Lindsay’s fiscal 2020 earnings indicates a year-over-year surge of 80.6%.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth. Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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