Key insights
- DA Davidson suggests reduced fertilizer usage could boost machinery sales for companies like Deere & Company, CNH Industrial, and Titan International. Their analysis indicates potential upside for Deere, with a strong correlation between their crop model and Deere's sales. Despite some mixed analyst sentiment and valuation concerns for CNH Industrial, the overall outlook for the agriculture machinery sector appears cautiously optimistic, driven by improved farmer net income projections.
Investing.com - DA Davidson analyst Michael Shlisky said Thursday that reduced fertilizer usage by farmers this year could lead to increased machinery sales for companies under the firm’s coverage.
The analyst ran the firm’s proprietary US crop model for 2026 and 2027 following the completion of US crop planting. The base case for both corn and soybeans suggests net income has passed its bottom and is headed upward.
DA Davidson found that incomes could rise more appreciably in 2026-2027 under assumptions of reduced fertilizer usage. The firm noted a high correlation between its model and following-year sales of Deere & Company (NYSE:DE), suggesting upside versus current modest expectations.
The analyst said the tailwinds may also be relevant for CNH Industrial (NYSE:CNH) and Titan International (NYSE:TWI). CNH, with a market cap of $13.6 billion, has gained 21% year-to-date despite trading at a P/E ratio of 35.65. According to InvestingPro, 7 analysts have revised their earnings downwards for the upcoming period, and the stock appears overvalued based on Fair Value analysis. DA Davidson maintains a Buy rating on Deere and Titan International, and a Neutral rating on CNH Industrial.
The firm continues to point to Deere as the best way to play the agriculture sector at the moment.
In other recent news, CNH Industrial reported its first-quarter 2026 earnings, surpassing expectations with an earnings per share (EPS) of $0.01, compared to the forecasted $0.0025. The company also exceeded revenue projections, reporting $3.83 billion against an expected $3.71 billion. These results have been well-received by investors, indicating confidence in the company’s performance despite broader economic challenges.
In terms of stock ratings, Goldman Sachs downgraded CNH Industrial from Buy to Neutral, citing concerns over demand and adjusting its price target from $12.00 to $10.50. Meanwhile, Bernstein initiated coverage on CNH Industrial with a Market Perform rating and set a price target of $11.00, suggesting a potential 7% upside.
Additionally, Stifel noted that auction prices for used agricultural equipment have shown a slight year-over-year increase, while construction equipment prices displayed mixed results. These developments reflect ongoing market dynamics and trends in the agricultural and construction equipment sectors.
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