Deere & Co.’s stock will likely decrease if there is a strike, according to Mark Grywacheski, partner at the Quad-Cities Investment Group.
A company’s stock value is based on its ability to generate revenues and profits, Grywacheski said, and a strike would impact Deere's production output. If the strike lasts weeks or months, the impact on the stock will be greater than if the strike lasts a few days.
“You have 10,000-plus employees walking off of your factory floor,” Grywacheski said. “That is just going to be another factor that can potentially disrupt those revenues and profits and actually what Wall Street would be looking at.”
At 4 p.m. Oct. 13, Deere’s stock was valued at $329 a share, down $1.60. Deere stock fell from $343.02 on Monday, Oct. 11 to $333.32 on Tuesday, Oct. 12.
Deere’s stock has remained steady throughout the pandemic, even as other companies struggled to keep value up while facing supply chain and labor shortage issues. Deere recorded record-high profits over the past year.
“I believe John Deere set a new all-time high of close to $400 (a share) back, I believe, around May,” Grywacheski said.
Dave Swenson, an economist at Iowa State University, said Deere flourished during the pandemic because they are based in the agriculture sector which received economic investment from the government. They also experienced strong demand for agricultural machinery.
“They were just in a really good position," Swenson said. "They got lucky.”
Dividends related to Deere stock is another important component that Wall Street will watch, according to Grywacheski. Throughout the pandemic, many manufacturing companies eliminated their dividend completely, but Deere continued to deliver them to investors.
“It was still able to pay out a quarterly dividend and actually in 2021 this year it's actually been able to increase its quarterly dividend,” Grywacheski said.
If there is an extended strike that brings Deere’s stock value down, other public companies that are Deere suppliers could be impacted as well, according to Grywacheski. The strike would interfere with a supplier’s ability to generate revenues and profits due to a shift in demand.
Swenson said plants that supply Deere parts will reduce production due to the Deere's decrease in demand for parts. With fewer employees at work, the line will slow down. This could lead to layoffs at supplier companies.
“We don't know how John Deere is going to respond to the strike,” Swenson said. “But what we do know is if a plant does shut down, you have to multiply through the ripple effect economic impact that's just inevitable. You're going to have an effect.”