Deere & Company (DE) on Q3 2022 Results - Earnings Call Transcript
Operator: Good morning, and welcome to Deere & Company Third Quarter Earnings Conference Call. Your lines have been placed on a listen-only mode until the question-and-answer session of today’s conference. I would now like to turn the call over to Mr. Brent Norwood, Director of Investor Relations. Thank you. You may begin. Brent Norwood: Hello. Also on the call today are Cory Reed, President of Worldwide Production & Precision Ag; Raj Kalathur, Chief Financial Officer and President of John Deere Financial; Josh Jepsen, Deputy Financial Officer; and Rachel Bach, Manager of Investor Communications. Today, we’ll take a closer look at Deere’s third quarter earnings, then spend some time talking about our markets and our current outlook for fiscal year 2022. After that, we’ll respond to your questions. Please note that slides are available to complement the call this morning. They can be accessed on our website at johndeere.com/earnings. First, a reminder. This call is being broadcast live on the Internet and recorded for future transmission and use by Deere & Company. Any other use, recording or transmission of any portion of this copyrighted broadcast without the expressed written consent of Deere is strictly prohibited. Participants in the call, including the Q&A session, agree that their likeness and remarks in all media may be stored and used as part of the earnings call. This call includes forward-looking comments concerning the Company’s plans and projections for the future that are subject to important risks and uncertainties. Additional information concerning factors that could cause actual results to differ materially is contained in the Company’s most recent Form 8-K and periodic reports filed with the Securities and Exchange Commission. This call also may include financial measures that are not in conformance with accounting principles generally accepted in the United States of America, GAAP. Additional information concerning these measures, including reconciliations to comparable GAAP measures, is included in the release and posted on our website at johndeere.com/earnings under Quarterly Earnings and Events. I will now turn the call over to Rachel Bach. Rachel Bach: Thanks, Brent. Good morning. John Deere achieved higher production rates in the third quarter, resulting in 25% increase in net sales despite ongoing supply challenges. Financial results for the quarter included an 18% margin for the equipment operations. Ag fundamentals remain solid with our order books beginning to fill for model year ‘23 products, reflecting continued healthy demand as we look ahead. The construction and forestry markets also continue to benefit from demand, contributing to the division’s strong performance in the quarter. Similarly, order books are now extending into 2023, providing visibility into the New Year. Slide 3 shows the results for the second quarter. Net sales and revenues were up 22% to $14.1 billion while net sales for the equipment operations were up 25% to $13 billion. Net income attributable to Deere & Company was $1.884 billion or $6.16 per diluted share. Looking at results by segment, beginning with our Production & Precision Ag business on slide 4. Net sales of $6.096 billion were up 43% compared to the third quarter last year, largely due to higher production and shipment volumes. Price realization in the quarter was positive by about 15 points, whereas currency translation was negative by about 4 points. Operating profit was $1.293 billion, resulting in a 21% operating margin for the segment. The year-over-year increase in operating profit was primarily due to price realization and higher shipment volumes, partially offset by higher production costs and higher SA&G and R&D spend. The production costs were mostly elevated material and freight. Overhead spend was also higher for the period as persistent supply challenges continued to cause production inefficiencies. Despite these challenges, factories were able to achieve higher rates of production and made progress on reducing the number of partially completed machines in inventory. Our factories are focused on finishing and shipping the remaining machines in the fourth quarter which will help our progress toward restoring productivity and efficiencies going into next year. The increased SA&G and R&D spend reflects our continued development of our technology stack and our progress on our LEAP ambitions, both of which will unlock additional value for our customers. Next Small Ag & Turf on slide 5. Net sales were up 16%, totaling $3.635 billion in the third quarter due to higher shipment volumes and price realization more than offsetting negative currency translation. Price realization in the quarter was positive by 10 points while currency translation was negative by over 4 points. For the quarter, operating profit was down year-over-year at $552 million, resulting in a 15% operating margin. The decreased profit was primarily due to higher production costs, specifically materials, offset by price realization. Turning now to the industry outlook on slide 6. We expect U.S. and Canada industry sales of large ag equipment to be up around 15%. While the industry continues to be constrained by supply, demand remains robust and our guidance assumes a heavier back-end loaded year for industry retail. Relative to the industry, we’ve had our strongest results in high horsepower row crop tractors, and we plan to end the year approaching our highest market share on record. Our order books for the remainder of the current fiscal year are full, and we see signs of robust demand into 2023 with some order books already full through the first half of next year. Small Ag & Turf industry demand continues to be estimated generally flat this year. While we see steadiness from our hay and forage segment, consumer products such as contact utility tractors and turf equipment, are down due to supply constraints, low turf inventory and moderating demand. Moving on to Europe. The industry is forecasted to be roughly flat, despite solid demand. While supply constraints and operating challenges are affecting the industry, we expect to finish the year with higher shipments and market share gains. In South America, we expect industry sales of tractors and combines to increase by about 10% to 15%. Despite the low trend crop yields due to inclement weather, customers are very profitable this year, benefiting from high commodity prices. Industry sales in Asia are still forecasted to be down moderately as India, the world’s largest tractor market by unit, has moderated from record volumes achieved in 2021. Moving on to our segment forecast on slide 7. Production & Precision Ag net sales continue to be forecasted up between 25% and 30% in fiscal year ‘22. The forecast assumes nearly 14 points of positive price realization for the full year, which will allow us to be price/cost positive for the fiscal year. This is partially offset by roughly 2 points of currency headwind. For the segment’s operating margin, our full year forecast is between 20% and 21%. The forecast reflects higher costs for material and freight inflation as well as the elevated overheads associated with the supply constraints that have introduced a number of factory inefficiencies this year. Slide 8 shows our forecast for the Small Ag & Turf segment. We now expect fiscal year ‘22 net sales to be up in the range of 10% to 15%. This guidance includes over 9 points of positive price realization, partially offset by 3 points of unfavorable currency impact. The segment’s operating margin is now forecasted between 14% and 15%. The margin guidance reflects higher material costs and lower expectations for volume as small engine availability has been especially challenging. Price/cost remains neutral for the year. Changing to Construction & Forestry on slide 9. For the quarter, net sales of $3.269 billion were up 8% due to price realization. Operating profit increased year-over-year to $514 million, resulting in a 16% operating margin. Favorable price realization offset higher production costs during the quarter. The production costs were mainly a result of elevated material and freight as well as higher overhead spend. Now, let’s take a look at our 2022 Construction & Forestry industry outlook on slide 10. Industry sales of earthmoving equipment in North America are expected to be up approximately 10%, while the compact construction market is forecasted to be flat to down 5%. Though demand remains strong for compact construction products, the downward revision reflects extremely low levels of inventory and supply challenges constraining shipments. End markets for earthmoving are expected to remain strong as oil and gas activities remain steady, U.S. infrastructure spend begins to ramp and CapEx programs from the independent rental companies drive re-fleeting efforts. Housing starts have moderated though still remain elevated versus historical levels. Additionally, record low levels of new and used equipment will dampen any slowdown. In forestry, we now expect the industry to be flat to down 5%, primarily due to supply constraining the ability to meet demand. Global road-building markets are expected to be flat to up 5%. Road building demand remains strongest in the Americas while China and Russia markets are down significantly. The C&F segment is on slide 11. Deere’s Construction & Forestry 2022 net sales are forecasted to be up around 10%. Our net sales guidance for the year includes about 10 points of positive price realization and 3 points of negative currency impact. The segment’s operating margin outlook remains at a range of 15.5% to 16.5%. Shifting over to our Financial Services operations on slide 12. Worldwide Financial Services net income attributable to Deere & Company in the third quarter was $209 million. This is a slight decrease compared to the third quarter last year due to unfavorable discrete income tax adjustments, a higher provision for credit losses and lower gains on operating lease residual values. These were partially offset by income earned on a higher average portfolio. For fiscal year ‘22, we maintain our net income outlook at $870 million, slightly lower than fiscal year ‘21 due to a higher provision for credit losses, less favorable financing spreads and higher SA&G. The higher provisions for credit losses are primarily related to Russia. The segment is expected to continue to benefit from income earned on higher average portfolio balance. Overall, Financial Services continues to deliver steady results. Credit loss provisions, lease return rates and past dues are all in good shape, reflecting the solid balance sheet for our customers. Slide 13 outlines our guidance for net income, our effective tax rate and operating cash flow. For fiscal year ‘22, we adjusted our outlook for net income to be between $7 billion and $7.2 billion. The full year forecast is inclusive of the impact of higher raw material prices, higher logistics costs and production inefficiencies caused by supply disruptions. Our forecasted price realization is expected to outpace both material and freight costs for the entire year. Moving on to tax. Our guidance incorporates an effective tax rate projected to be between 21% 23%. Lastly, cash flow from the equipment operations is now expected to be in the range of $5.3 billion to $5.5 billion. The decrease reflects the adjusted income forecast and increases in working capital required through the end of the fiscal year as we expect to maintain higher production levels heading into the first quarter of 2023. At this time, let’s discuss a few topics for the quarter in more detail. First, I would like to take a closer look at Production & Precision Ag’s third quarter results, an impressive jump in net sales, both compared to the third quarter last year as well as compared to the second quarter this year. Net sales were up 43% year-over-year and up 19% sequentially, which is not our typical seasonality. Cory, can you talk through some of the factors that enabled us to achieve that? Cory Reed: Yes. Thanks, Rachel. There’s really several contributing factors this quarter. First is higher production rates. If you look back at the first half of this year, we had a work stoppage in the first quarter and had to ramp up at several of our largest U.S. factories. We also had two new product introductions, the 9R 4wd drive tractor and the X9 combine. During the third quarter, we ramped up and we achieved our highest production line rates yet this year, across several large ag factories. Second, as we started to ramp up through the second quarter, we continued to experience supply challenges, resulting in higher partially completed machines in inventory. We’ve procured the needed parts and made good progress in both, finishing and shipping machines, reducing the number of partially completed machines in inventory. Now we did see overall inventories build slightly again in the third quarter, but that was mostly attributable to higher levels of raw inventory as we expect to maintain higher production rates, both through the fourth quarter and into Q1 of ‘23, which is different from our typical production wind down in the fourth quarter. It’s important to note, we’re focused on not adding more partially completed machines to inventory. We’re making progress completing that inventory and getting it delivered to our dealers and customers. We’ve also been able to increase our parts inventory, which is helping us as we go into the fall to support our customers and their operations. Rachel Bach: Going back to the higher production rates and even the partially completed inventory, we’re seeing some modest improvement in the supply base, but overall, it’s still very fragile and deliveries are still choppy. Cory Reed: Yes. That’s right. We continue to prioritize getting equipment out to our customers. While past due deliveries from suppliers have declined a bit, they’re still at elevated levels. Missing parts and late part deliveries result in rework to complete partially built machines and contribute to production inefficiencies and higher overhead costs. We’re able to achieve the higher line rates despite the continued difficulties and constraints within the supply chain. We’re proactively working with our supply base to obtain allocations and improve on-time deliveries of parts, looking for opportunities to dual-source or providing resources to address constraints. Again, also we can get equipment out to our dealers and customers. Josh Jepsen: This is Josh. Maybe one thing to add. As Cory mentioned, we’ve been focused on producing at higher levels in order to get products to customers, which has resulted in higher costs related to supply availability, inflationary pressures, overhead inefficiencies. So, maybe for example, we’ve incurred expedited freight and experienced production inefficiencies. Expedited freight comes at a premium. And any time we have to touch machines or move them in our factories more than once, it comes at a cost. In that respect, 2022 has been a challenge, given the ramp in demand juxtaposed with the lost production in the first quarter and a challenging supply environment. So, we’ve really been chasing production all year as a result. Importantly, we’re seeing the benefit of getting those products in the hands of our customers, reflected in market share and retail statistics. So, we feel like we’re broadly outperforming the industry. As we look forward, we’ll build at higher levels of production in Q4 and into 1Q ‘23, which will help with our inefficiencies while also taking actions on costs that we’ve incurred over the last few years. Rachel Bach: Yes. All good points, Josh. You both now mentioned higher production rates achieved during the third quarter are expected to carry forward. It’s too early to guide for fiscal year 2023 but let’s spend a little more time there. Cory, can you share some insights from our customers’ perspective to provide some context as we look ahead? Cory Reed: Sure. Overall, ag fundamentals remain really strong. Corn and soy prices have declined from a few months ago, but so of inputs like fertilizer and others. Also when you look at global stocks to use, it’s tight and it’s expected to decline again, continuing to support elevated crop prices. May also take a couple of seasons to recover those grain stocks to normal levels. So, while profitability may come in a bit from record ‘22 levels, our customers will still be profitable, and the environment is supportive of replacement demand, especially when you consider that farmers haven’t been able to replenish their fleets as much as they wanted to this year. The age of the fleet remains above average. Additionally, dealer inventories remain at historic lows since the industry shorted demand the last couple of years due to supply constraints. These factors should help extend the duration of the replacement cycle. Rachel Bach: And how has that been factoring into our crop care early order book that opened in June, so sprayers and planters? Cory Reed: As you may recall from last year, we basically filled the full year production in the first phase of the EOP. We didn’t do a second or third phase like we’ve done in the past. Then with the work stoppage and supply challenges, we’ve delivered a portion of those orders after their seasonal use this year. So, this year’s program is structured differently with two phases, both of which are on allocation. These phases are only intended to source orders for pre-seasonal use deliveries. We’ll run yet another phase later for post-seasonal shipments. So, year-over-year, EOP results won’t be comparable due to the different structures we’re running this year versus last. Rachel Bach: And how about tractors? Cory Reed: We’re also sold ahead on tractors well into the second quarter next year. And our new and used inventories for all large tractors are sitting at multiyear lows with products like the 9R tractor going through both, the work stoppage and new product transition, the momentum for all large tractors coming out of the third quarter on production rates will carry forward through the fourth quarter and well into next year. Demand is strong and still outstripping supply in 2023. Bottom line, we fully expect to produce more large ag equipment next year than we did this year. Brent Norwood: Yes. And let me add that these expectations around higher production rates are reflected in our revised cash flow outlook for this year, which we lowered a little bit due to increased working capital. We don’t plan to see our normal seasonal reduction in inventory. And to help offset some of the supply challenges and maintain the higher production rates through the fourth quarter and into the next year, we’re carrying a little bit more raw inventory, heading out of 2022. Rachel Bach: Thanks, Brent. That is important to note. The inventory increases are not replacing partially completed inventory but increasing raw inventory as we prepare for that continued higher production rates. This is different than what we’ve seen seasonally in the past. So Cory, before we move on, what are we seeing on take rates in the model year ‘23 early order programs? Cory Reed: Yes. It’s good across the board. Customers are seeing the value and technology and the advanced solutions that we’re offering. We saw increases in take rates for ExactEmerge on our planners to nearly 60%, and ExactApply for sprayers jumped over 10 points to 65% take rate. Tech products like our premium activations for tractors and sprayers are nearing 100% adoption by our customers. Rachel Bach: Great. Thank you. Now, I’d like to spend some time on the industry outlook. U.S. and Canada large ag is projected to be up about 10 -- about 15% on a unit basis. It’s been a common theme across the industry. AEM retail data is choppy month-to-month and byproduct and impacted by when the products are able to get shipped so less reflective of demand right now. Our model year ‘23 order books reflect that, too. Demand has remained resilient as ag fundamentals remained positive. We’ve been able to ship more product in the third quarter and are forecasting to outpace the industry for full year, indicating some market share gains in the U.S. and Canada large ag space. Cory, what about Europe? Cory Reed: Yes, Europe is another region where demand continues to outpace what the industry can supply. The industry has seen a lot of production challenges in Europe due to supply chain issues, geopolitical events and other disruptions as well. It’s the same story of partially completed machines waiting for parts or even, in some cases, completed machines just waiting on an outbound truck. For us though, despite all of that, Europe has remained a bright spot. The team has executed really well, we’ve been outperforming the industry. So, we’re on track to grow high horsepower tractor, combine and SPFH share there as well. Rachel Bach: And what about South America? Cory Reed: We’re seeing strong profitability for our customers and strong market demand, which has outpaced industry production in 2022, particularly in Brazil, where we’re releasing production monthly to maintain tight controls between inflation and pricing. And we’re seeing our calendars fill up within hours of releasing them. We fully expect this strong demand cycle in Brazil will continue in 2023. On top of that, our precision ag engagement in the region also continues to accelerate. South America is experiencing the fastest growth in engaged acres of anywhere in the world. And technologies such as ExactEmerge are accelerating across the region. Historically, we’ve had an objective to put South American profitability on par with Region 4. We’re now meeting and exceeding that goal. Rachel Bach: Great. Thanks, Cory. I think that’s helpful insight to how our net sales guides reconcile to the industry guides. Our net sales guide includes not only higher price but also stronger volumes and higher take rates of precision ag solutions. Brent, what about Small Ag & Turf? The industry is expected to be flat compared to our net sales guide of up 10% to 15%. Brent Norwood: Yes. I think we really need to parse it out a little bit. If we look at the parts of our business that are linked to the ag economy like midsized tractors versus consumer products like compact utility tractors, there’s different stories going on there. First, with midsized tractors linked more to hay and forage markets, livestock and dairy margins, they’ve all remained pretty steady. High protein and dairy prices have helped offset some of the higher feed and input costs that we’re seeing. So, we do see continued demand for our products like the 6 Series tractors, and this is a positive contributor in terms of our mix for Small Ag & Turf. On the other hand, consumer products are beginning to soften as they are more closely linked to the general economy. So, equipment inventory -- so while equipment inventories remain well below normal levels, they’re starting to see a rise a little bit for small tractors. So, we’re monitoring these inventory levels closely. But restocking the channel should moderate slowing in the retail demand that we’re seeing, especially in Turf, which hasn’t seen much of any increase in inventories just yet. Rachel Bach: Thanks. I touched on C&S industry outlook earlier. Josh, anything to add for C&S? Josh Jepsen: Sure. In North America, while we’re seeing indicators of housing moderate a bit, earthmoving and road building are helped by steady oil and gas, and the U.S. infrastructure beginning to ramp up. In fact, in North America, it’s really been a bright spot for road building. China and Russia are down for road building, and we’re beginning to see some softening in Europe, but North America is offsetting much of that. And that mix is contributing to some really good margins for road building, which are the best we’ve seen since the acquisition. Rachel Bach: Thanks, Josh. Raj, before we transition to the Q&A portion, any summary comments? Raj Kalathur: Sure, Rachel. A few thanks. First, I want to acknowledge the extraordinary efforts by our production and operations employees to ramp up factory output while finishing and shipping a portion of the partially completed inventory while continuing to manage through supply challenges. The dedication to getting products to our customers is just phenomenal. Yes, through the third quarter, we continued to see elevated costs and production inefficiencies, but we also demonstrated higher line rates and those rates will continue through the fourth quarter and into next fiscal year to meet customer demand. Next, I want to highlight the 1.2 billion [Technical Difficulty] shares we repurchased during the third quarter. It’s a testament to our use of cash philosophy. We will continue to be proactive with buybacks and opportunistic with volatility in the market. As we look ahead, we plan to continue the momentum we built during the third quarter, into the fourth quarter and beyond, which continue to be dependent on supply chain performance. As Josh mentioned, we are taking steps to reduce the impact of a persistently volatile supply chain, allowing us to focus on improving production inefficiencies and managing material costs as we pivot to 2023. Demand remains strong in multiple end markets, and we continue to see strong demand for our technologies and precision solutions. Finally, through our smart industrial strategy and execution of our leap ambitions, we will continue to unlock more value for our customers, leaving our best years still to come. Brent Norwood: Now, we are ready to begin the Q&A portion of the call. The operator will instruct you on the polling procedure. In consideration of others and our hope to allow more of you to participate in the call, please limit yourself to one question. If you have additional questions, we ask that you rejoin the queue. Operator? Operator: [Operator Instructions] Our first question comes from Tim Thein with Citigroup. Operator: Our next question comes from Tami Zakaria with JPMorgan. Operator: Our next question comes from Kristen Owen with Oppenheimer. Operator: Our next question comes from Jamie Cook with Credit Suisse. Operator: Our next question comes from Dillon Cumming with Morgan Stanley. Operator: Our next question comes from Seth Weber with Wells Fargo Securities. Your may ask your question. Operator: Our next question comes from Rob Wertheimer with Melius Research. Operator: Our next question comes from Jerry Revich with Goldman Sachs. Operator: Our next question comes from David Raso with Evercore ISI. Operator: Your next question comes from Steven Fisher with UBS. Operator: Our next question comes from Stephen Volkmann with Jefferies. Operator: Our next question comes from Chad Dillard with Bernstein. Operator: Our next question comes from Michael Feniger with Bank of America. Operator: Our last question comes from John Joyner with BMO. Brent Norwood: I think we’re out of time for the rest of the hour. So thank you, everybody, for calling in. We appreciate the questions, and we look forward to following up with everybody after the call. Thanks, all. Operator: Thank you. And that does conclude today’s call. We thank you for your participation. At this time, you may disconnect your lines.
Deere’s Deep Roots in Brazil Position It for Long-Term Growth, Says Truist
Truist Securities is maintaining its Buy rating on Deere & Company (NYSE:DE) with a $619 price target, highlighting the company's expanding footprint in Brazil as a key driver of long-term growth and earnings resilience.
Over the past two decades, Deere has methodically built out its presence in Brazil, investing in localized manufacturing, product development, and a robust dealer network. These efforts have helped the company capture leading market share in the country while achieving profitability on par with its North American operations.
Brazil’s agricultural sector is increasingly shifting toward large-scale commercial farms, creating fertile ground for Deere’s precision agriculture technologies. The company is seeing a direct link between adoption of these tools and market share gains, reinforcing its strategy to accelerate top-line growth in the region.
While Deere continues to target a 20% through-cycle margin, its performance already exceeds that benchmark thanks to high-margin parts sales, a growing financial services arm, and geographic diversification. The company’s ability to sustain industry-leading margins and deliver consistent earnings through various market cycles positions it as a standout in the industrial sector.
Truist believes Deere’s blend of organic growth, precision ag leadership, and global earnings strength makes a compelling case for continued upside, even in a challenging macro environment.
Deere Reaps Analyst Upgrade on Ag Tech Potential
Melius Research upgraded Deere (NYSE:DE) to Buy from Hold, boosting its price target to $750, citing growing confidence in the company's transformation into a tech-driven agricultural powerhouse.
After a prolonged period of caution, the firm sees Deere's dominant position in precision agriculture and smart farming solutions as a major value catalyst. While the exact timing of a broader cyclical recovery in the ag sector remains unclear, Melius believes the market will soon begin recognizing the long-term earnings potential embedded in Deere’s recurring revenue model.
Deere is targeting recurring and SaaS-style revenue to represent 10% of total sales—an opportunity estimated at $5 billion by 2030. As adoption of these technologies accelerates and the benefits to farmers become more tangible, the firm expects investors to increasingly price in this high-margin growth potential.
With a vast runway for further expansion and monetization of its ag tech innovations, Deere is now viewed by Melius as not just a cyclical equipment manufacturer but a platform for recurring value creation.
Deere Tops Q2 Estimates but Narrows Outlook Amid Weak Equipment Demand
Deere & Company (NYSE:DE) beat second-quarter expectations on both earnings and revenue, but trimmed the lower end of its full-year profit outlook as softening demand weighs on its core agricultural equipment business. The company’s shares closed more than 3% higher today.
For the quarter, the company reported adjusted earnings per share of $6.64, comfortably ahead of the $5.56 analyst consensus. Revenue also outperformed, rising to $12.76 billion versus expectations of $10.98 billion.
Despite the beat, shipment volumes declined across key segments, with Production & Precision Agriculture sales down 21% year-over-year. Still, Deere managed to preserve strong operating margins, showcasing disciplined cost control amid the downturn.
The company now expects full-year net income between $4.75 billion and $5.50 billion, adjusting the bottom of its prior $5.0–$5.5 billion range to reflect ongoing market headwinds.
Deere & Company (DE) Surpasses Earnings and Revenue Estimates
- Deere & Company (NYSE:DE) reported an impressive EPS of $6.64, surpassing the estimated $5.56.
- Revenue for the quarter was $11.17 billion, exceeding expectations and demonstrating the company's market resilience.
- Despite facing challenges such as tariff impacts, DE adjusted its fiscal 2025 net income outlook of $4.75 billion to $5.5 billion, reflecting a proactive approach to navigating a dynamic environment.
Deere & Company, listed on the NYSE as DE, is a leading manufacturer of agricultural equipment. On May 15, 2025, DE reported impressive earnings per share (EPS) of $6.64, surpassing the estimated $5.56. This achievement highlights the company's ability to exceed market expectations, as it also reported revenues of approximately $11.17 billion, exceeding the estimated $10.95 billion.
Despite the positive earnings surprise of 16.9%, DE's EPS of $6.64 was lower than the $8.53 reported in the same quarter last year. This decline reflects the challenges faced by the company, including tariff impacts. However, DE has consistently outperformed consensus EPS estimates over the past four quarters, demonstrating its resilience in a dynamic market environment.
DE's revenue for the quarter ending April 2025 was $11.17 billion, surpassing the Zacks Consensus Estimate by 4.89%. However, this was a decline from the $13.61 billion recorded a year ago. The company's Production & Precision Agriculture segment saw a 21% drop in sales to $5.23 billion, while the Small Agriculture & Turf segment experienced a 6% decrease to $2.99 billion. The Construction & Forestry segment also faced a 23% decline, bringing in $2.95 billion.
In response to these challenges, DE adjusted its fiscal 2025 net income outlook, broadening its forecast to a range of $4.75 billion to $5.5 billion. This adjustment reflects the company's proactive approach to navigating a "dynamic environment," as highlighted by CEO John May. Despite these challenges, DE shares had risen approximately 18% prior to the announcement, indicating investor confidence in the company's long-term prospects.
DE's financial metrics provide further insight into its market position. The company has a price-to-earnings (P/E) ratio of approximately 21.73, indicating the price investors are willing to pay for each dollar of earnings. Its price-to-sales ratio stands at about 2.88, reflecting the value placed on each dollar of sales. Additionally, the enterprise value to sales ratio is around 4.11, showing the company's total valuation relative to its sales. These metrics, along with a debt-to-equity ratio of approximately 2.88 and a current ratio of around 2.20, highlight DE's financial stability and ability to cover short-term liabilities.
Deere Stock Falls as Profit Halves, Sales Miss Expectations
Deere & Co. (NYSE:DE) saw its shares fall more than 2% intra-day today after reporting a steep 50% decline in net income and weaker-than-expected sales for its fiscal first quarter, as the agricultural equipment giant grapples with inventory challenges and market uncertainty.
For the quarter, net income dropped to $869 million, down sharply from $1.75 billion a year earlier, though it still slightly exceeded analyst projections of $848.7 million. Revenue plunged 30% to $8.51 billion, while net sales, excluding finance and interest income, fell to $6.81 billion, well below the $7.67 billion consensus estimate.
Deere maintained its full-year 2025 net income forecast of $5 billion to $5.5 billion, despite mounting industry pressures. The company expects sales in its Production & Precision Agriculture division to decline by 15% to 20%, while small agriculture and turf revenue is projected to drop around 10%. Additionally, construction and forestry equipment sales are forecasted to shrink by 10% to 15%.
As the world’s largest farm equipment manufacturer, Deere is navigating a challenging macroeconomic environment, where lower demand and inventory adjustments are weighing on financial performance. While the company held firm on its full-year guidance, the sharp revenue decline and sector-wide headwinds have rattled investors, sending the stock lower.
Deere & Company's Financial Performance Overview
- Earnings Per Share (EPS) of $3.19, surpassing the estimated $3.11, marking a 1.92% surprise over expectations.
- Revenue for the quarter was approximately $8.51 billion, exceeding the estimated $7.70 billion.
- Net Income for the first quarter was $869 million, a significant decrease from the previous year's $1.7 billion.
Deere & Company, listed as NYSE:DE, is a leading player in the manufacturing of farm equipment. The company is known for its innovative agricultural machinery and solutions. Deere competes with other industry giants like CNH Industrial and AGCO Corporation. Despite facing challenges, Deere continues to be a significant force in the market.
On February 13, 2025, Deere reported earnings per share (EPS) of $3.19, surpassing the estimated $3.11. This marks a 1.92% surprise over the expected figures, as highlighted by Zacks. However, this is a decrease from the $6.23 per share reported in the same quarter last year. Despite this decline, Deere has consistently outperformed consensus EPS estimates over the past four quarters.
Deere's revenue for the quarter was approximately $8.51 billion, exceeding the estimated $7.70 billion. However, the actual revenue of $6.81 billion fell short of the Zacks Consensus Estimate by 11.51%. This is a significant drop compared to the $10.49 billion in revenues from the same period last year. Despite this, Deere has managed to exceed consensus revenue estimates three times in the last four quarters.
The company's net income for the first quarter was $869 million, translating to $3.19 per share. This is a significant decrease compared to the previous year's first-quarter net income of $1.7 billion, or $6.23 per share. Deere's worldwide net sales and revenues fell by 30% to $8.508 billion in the most recent quarter, with net sales specifically at $6.809 billion, down from $10.486 billion in 2024.
Deere's stock has experienced a significant decline following a sharp fall in earnings. The company is currently facing a challenging demand environment, resulting in considerably lower sales across its core operating segments. Despite these challenges, John C. May, the chairman and CEO, emphasized the company's ongoing efforts to optimize inventory levels in response to uncertain market conditions.
Deere Stock Falls as Profit Halves, Sales Miss Expectations
Deere & Co. (NYSE:DE) saw its shares fall more than 2% intra-day today after reporting a steep 50% decline in net income and weaker-than-expected sales for its fiscal first quarter, as the agricultural equipment giant grapples with inventory challenges and market uncertainty.
For the quarter, net income dropped to $869 million, down sharply from $1.75 billion a year earlier, though it still slightly exceeded analyst projections of $848.7 million. Revenue plunged 30% to $8.51 billion, while net sales, excluding finance and interest income, fell to $6.81 billion, well below the $7.67 billion consensus estimate.
Deere maintained its full-year 2025 net income forecast of $5 billion to $5.5 billion, despite mounting industry pressures. The company expects sales in its Production & Precision Agriculture division to decline by 15% to 20%, while small agriculture and turf revenue is projected to drop around 10%. Additionally, construction and forestry equipment sales are forecasted to shrink by 10% to 15%.
As the world’s largest farm equipment manufacturer, Deere is navigating a challenging macroeconomic environment, where lower demand and inventory adjustments are weighing on financial performance. While the company held firm on its full-year guidance, the sharp revenue decline and sector-wide headwinds have rattled investors, sending the stock lower.
