Machinery Death Match: Caterpillar Vs. Deere
“The charts are screaming, ‘All things machinery are looking up,’” Cramer said during Tuesday’s Mad Money. Too bad he knows the fundamentals are saying something different.
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A company lives and dies with its end markets, and that’s the glaring difference between Caterpillar and Deere , the former selling machinery to construction firms and the latter to farmers. With the agriculture business struggling right now, DE is anything but a buy.
Still, two of Cramer’s favorite technical analysts have said that Deere’s stock is on the verge of breaking out, one of them offering a price target of $67, just under $21 higher than its Tuesday close. But the Mad Money hosts can’t ignore weakness across the industry.
Deere has said it expects crop prices to remain below 2008 levels, and the lack of income for farmers means there’s no demand for new equipment. That weakness, both here at home and overseas, will result in fourth-quarter production slowdowns, the company said, which comes after sluggish ag equipment sales across the board in September. To top it all off, Deere doesn’t expect any significant help from the US stimulus package.
That’s why Cramer recommended Caterpillar for anyone wanting to own a machinery stock. The company today reported a better-than-expected quarter and offered positive guidance, making CAT a strong buy for both its technicals and fundamentals. Deere, however, can point only to its chart.
A previous version of this story inadverdently listed Cramer's charitable trust as owning Caterpillar.
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