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Deere shares slide as company provides a cautious outlook
AInvestThursday, Feb 15, 2024 9:00 am ET
2min read
DE --

Deere & Company (DE), a leading manufacturer of agricultural, construction, and forestry equipment, has reported its financial results for the first quarter of fiscal 2024. Shares slipped below key support at the $380 area as the outlook highlighted a difficult environment as rising rates hurt customers" borrowing costs. Investors will watch the $355 level as this marked the low for both November and December. 

The company's net income for the quarter decreased to $1.751 billion, compared to $1.959 billion in the same quarter last year. This decline was primarily due to lower Worldwide net sales and revenues, which decreased by 4% to $12.185 billion. Despite the decrease in net income, Deere & Company's earnings per share (EPS) for the quarter came in at $6.23, surpassing analysts' expectations of $5.21. 

The company's production and precision agriculture sales decreased for the quarter due to lower shipment volumes, partially offset by price realization. Operating profit decreased due to lower shipment volumes and higher selling and administrative (SA&G) and research and development (R&D) expenses, partially offset by price realization.

Small agriculture and turf sales also decreased for the quarter due to lower shipment volumes, partially offset by price realization. Operating profit decreased due to lower shipment volumes and higher SA&G and R&D expenses.

Construction and forestry sales remained flat for the quarter, with positive price realization offset by lower shipment volumes. Operating profit decreased primarily due to higher production costs, lower shipment volumes, the unfavorable effects of currency translation, and higher SA&G and R&D expenses. These items were partially offset by price realization and a favorable sales mix.

The industry outlook for fiscal 2024 remains uncertain, with expectations of decreased demand in various regions. In the U.S. and Canada, large agriculture equipment sales are expected to decrease by 10-15%, while small agriculture and turf sales are projected to decrease by 5-10%. In Europe, sales are expected to decrease by 10-15%, and in South America, tractor and combine sales are projected to decrease by around 10%. In Asia, sales are expected to decrease moderately.

Deere & Company's segment outlook for fiscal 2024 is as follows:

1. Production & Precision Ag: Net sales are projected to decrease by roughly 20%, with currency translation expected to be roughly flat and price realization to increase by approximately 1.5%.

2. Small Ag & Turf: Net sales are expected to decrease by 10-15%, with currency translation estimated to be roughly flat and price realization to increase by about 1.5%.

3. Construction & Forestry: Net sales are anticipated to decrease by 5-10%, with currency translation projected to be roughly flat and price realization to increase by approximately 1.5%.

Financial Services: The net income is expected to be around $770 million.

In conclusion, Deere & Company's Q1 earnings report highlights a mixed performance amid challenging market conditions. The company's net income decreased due to lower net sales and revenues, but it still managed to beat analysts' expectations for EPS. The outlook for fiscal 2024 remains uncertain, with expectations of decreased demand in various regions. However, the company remains optimistic about its ability to deliver value to customers through its products and solutions that empower them to do more with less.


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