Deere & Company (NYSE:DE) just keeps posting record results, and the market seems to shrug its shoulders. Deere has an exciting past, present, and future that gives the market more than enough reason to be excited. And yet, the market doesn't seem to care. Deere's business is extremely strong thanks to its execution abilities and financial strength. Plus, the underlying fundamentals of its core industries will see increasing demand for many years, thanks to soaring global populations.

Deere keeps on executing
Deere & Company's annual report reveals what a strong company it is. Its fiscal 2013 amounted to its best year yet. Deere delivered record profit for the third year in a row. Going back further, Deere has produced record net income for eight years out of the last 10. Not only is Deere performing strongly on an absolute basis, but it's becoming more efficient as well. Deere's fiscal 2013 operations produced a record-high return on operating assets, which demonstrates the company's execution abilities.

Deere followed up this solid performance with a record-setting fiscal 2014 first quarter. Deere generated record earnings due to 5% earnings growth. This was due to 3% growth in worldwide net sales. Leading the way was strong performance in Deere's Construction and Forestry segment, which grew sales by 4%.

Of course, it goes without saying that investors want to know not just where a company has been, but where it's going. Fortunately, Deere's future is as bright as its recent past, thanks in large part to the strong underlying fundamentals of the agriculture industry.

That's because Deere's equipment and services are specifically geared toward agriculture. This stands in stark contrast to its major competitor Caterpillar (NYSE:CAT), which focuses primarily on earth-moving equipment designed to serve the construction and mining industries. Construction was hit very hard during the recession, and while housing is showing signs of strength in North America, commercial construction still lags. And, the mining industry is in the midst of a very difficult operating climate, as precious metals prices fell sharply last year.

This has caused Caterpillar's underlying results to suffer. Caterpillar's sales fell 10% in the fourth quarter of 2013 and 16% for the full year, which it attributed specifically to falling sales of its mining equipment. These difficulties are expected to last throughout 2014 as well. It seems that Caterpillar is just in the wrong business at the wrong time.

Caterpillar management forecasts flat sales this year, and slightly less than 2% earnings growth. Profit growth will be realized by cost cuts. Clearly, Caterpillar's product focus is hurting the company, and yet, the stock holds a higher valuation than Deere.

Agriculture economics are rock-solid
Not only is Deere a well-run company, but it has the wind at its back because of the favorable long-term economics of the agriculture industry. Global populations continue to climb, and rising standards of living mean millions of new entrants into the middle class. This will result in a huge strain on farmers, who need to produce increasing amounts of food from the same amount of land available for food production.

According to fertilizer producer Mosaic (NYSE:MOS), the global population recently passed seven billion and will reach nine billion by 2050. Mosaic calculates that farmers will have to grow as much food over the next 50 years as they have over the full course of recorded human history. This is especially true in the emerging markets, where Mosaic exports approximately two-thirds of its phosphate fertilizer.

As a result, all those farmers will need the equipment and services that Deere provides.

Bet on agriculture over the long term
Deere keeps on producing record results, yet the market doesn't appreciate the company's true potential. While Caterpillar struggles from the poor conditions facing the mining industry, Deere's focus on agriculture will suit the company well over the next several years. That's because global populations are growing, emerging economies are expanding, and the fundamentals of the agriculture industry are sound. That's why Deere has a bright future ahead of it.

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Bob Ciura has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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