Stock of the Week: John Deere

10,000 workers on strike and we already think they’re overpriced

Andrew Willis 25 October, 2021 | 4:38AM
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Andrew Willis: Just as the post-pandemic global economic recovery gets into full swing, John Deere (DE), a supplier for mission-critical agriculture and construction sectors, met a tipping point in today’s tight labour market, as 10,000 workers walked off on strike.

Still, John Deere’s stock remains near all-time highs as tailwinds in infrastructure legislation and pent-up demand for agriculture equipment present attractive upside potential. But is that good enough?

On that demand side, there are risks from a changing climate, such as drought, which could put a dent in crop yields, notes equity analyst Dawit Woldemariam. This contributes to high uncertainty around our stock price fair value that’s already well below the market rate.

And ESG risks on the supply side could present problems for the company. Sustainalytics just recently downgraded the company’s rating for Labour Relations to Category 2 following the strike – noting potential reputational and financial risks that could arise.

Could environmental, social and governance concerns play a role in quelling post-pandemic stock price rallies? Will strikes become key stats like interest rates, or bond yields?... They may affect wage inflation, after all.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Deere & Co352.87 USD3.31Rating

About Author

Andrew Willis

Andrew Willis  is Editor for Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.

 

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