Deere & Co. has seen its share price soar over the first half of the year, outperforming technology giants such as Tesla.Gene J. Puskar/The Associated Press
If the U.S. stock market’s sharp rebound since April looks confounding given the many challenges lingering over the economy, you might discover a deeper appreciation for the comeback if you give Deere & Co. DE-N a closer look.
The Illinois-based farm equipment manufacturer is no Tesla Inc. TSLA-Q: It won’t satisfy an investor’s cravings for plays on artificial intelligence, it hasn’t made a big bet on humanoid robots and its green tractors aren’t driving themselves (yet).
But Deere, not Tesla, stands out as a stock that has driven the Standard & Poor’s 500 index to new heights. And it could continue to play a pivotal role as the second half of the year kicks off.
In the first half, Deere’s share price gained 20 per cent. It outperformed the Magnificent Seven – those technology behemoths, including Tesla, that drove the U.S. stock market last year – by more than 17 percentage points over the same six-month period.
Tesla – a poster child of last year’s stock market rally and a company with a far larger public profile – fell 21 per cent over this period.
The maker of electric vehicles is no bull market hero. The company reported this week that its global deliveries fell 13 per cent in the second quarter, compared with last year, making it an apparent victim of a consumer backlash against its chief executive officer, Elon Musk, and weaker EV demand.
The reason for Deere’s strong performance does not mean that investors are taking an unrealistically optimistic view of U.S. President Donald Trump’s erratic trade and immigration policies, which are destroying consumer confidence and weighing on the global economic outlook.
Rather, Deere has caught a wave of interest with investors who expect that the U.S. agricultural cycle will recover from low crop prices – especially corn, which is down about 40 per cent over the past three years.
“Sometimes farmers make good money, and sometimes they don’t. When they do, they tend to buy tractors,” Steve Volkmann, an analyst at Jefferies, said in an interview.
Right now, they’re not. Deere reported that its sales in the first six months of fiscal 2025, ended April 27, fell 22 per cent from the same period last year. Profit fell 35 per cent.
Investors are betting that the worst is over, so they are bidding up Deere’s share price in anticipation that the company will report better financial results somewhere down the road.
“Earnings have remained quite depressed, but the earnings multiple has really expanded and driven positive stock performance,” Mr. Volkmann said.
The stock trades at 25-times reported earnings, up from just over 16-times earnings at the start of the year, according to Bloomberg.
Investors are taking a chance. The rally in Deere’s share price could fizzle if crop prices fail to recover or tariffs take a deeper bite out of the company’s margins.
“The agricultural equipment cycle is at or near a bottom, but the situation nevertheless remains fragile,” Angel Castillo, an analyst at Morgan Stanley, said in a note this week.
Six questions facing U.S. stock investors as 2025’s second half kicks off
Nonetheless, Deere offers one satisfying explanation for why the U.S. stock market has staged an impressive rebound from its April lows and touched new highs this week.
The company is not an isolated case, either: The industrial sector, in which Deere resides, has moved to the front of the pack in the S&P 500 this year. Its gain of 12 per cent in the first half of the year is about double the pace of the index, and ahead of financials and the technology sector.
Despite being caught in the market downturn near the start of 2025, industrials have benefited from a number of broad trends beyond optimism over a turn in the agricultural cycle: Defence spending is on the rise, aircraft production is recovering, and interest in electrification and data centre expansion is thriving.
These trends have rewarded companies such as Boeing Co. BA-N, Honeywell International Inc. HON-Q, Eaton Corp. PLC ETN-N and GE Vernova Inc. GEV-N – another standout stock, with a gain of 54 per cent in the first half of the year.
But as the second half of the year begins, investors have plenty to worry about. Tariff uncertainty is lingering, interest rates remain stubbornly high as the Federal Reserve continues to fret over inflation and equity valuations are stretched.
These concerns could weigh on the performance of stocks in the months ahead.
But as this year’s rise of Deere and other large industrials demonstrates, investors who are enthusiastic about the renewed bull market in U.S. stocks aren’t ignoring the risks. They’re merely seizing the opportunities.