Those prices will likely ‘remain at levels that should stimulate both farmer income and ag equipment spending.’
The Action Alerts Plus team Monday (April 25) offered positive comments about agricultural machinery company Deere (DE) – Get Deere & Company Report and equipment rentals company United Rentals (URI) – Get United Rentals, Inc. Report.
As for Deere, crop conditions are a problem, the AAP team wrote in a commentary. According to the U.S. Drought Monitor, “nearly half (48%) of the winter wheat in Colorado was rated in very poor to poor condition, one-fifth to one-third of the wheat was rated very poor to poor in Kansas (31%), Nebraska (27%), and South Dakota (22%),” the AAP team said.
That “augurs in favor of ag commodity prices remaining at levels that should … stimulate both farmer income and ag equipment spending,” the AAP team said. “We would not be surprised to see a pull-forward in ag equipment spending in coming months should the Fed ‘front-load’ its interest rate hikes.”
Many investors expect the Federal Reserve to raise interest rates by 50 basis points or more at each of its next two meetings.
Looking at United Rentals, the AAP team cites the strong Architectural Billings Index for March and upbeat comments on non-residential construction from Nucor (NUE) – Get Nucor Corporation Report and Steel Dynamics (STLD) – Get Steel Dynamics, Inc. Report.
“We see those comments laying the groundwork for an upbeat outlook when United Rental reports its quarterly results later this week,” the AAP team said.
Construction equipment makers Caterpillar (CAT) – Get Caterpillar Inc. Report and Terex (TEX) – Get Terex Corporation Report also report earnings this week. And the AAP team expects their results to indicate strength for United Rentals.
Morningstar analyst Dawit Woldemariam likes United Rentals too.
“We think United Rentals will continue to be one of the top players in the equipment rental industry,” he wrote in a January commentary. “As the industry leader, the company provides customers better equipment availability and reliability than smaller players.”
