Deere & Company DE shares fell 5.1% in the pre-market trading, as the company cut down its 2024 guidance.
DE reported second-quarter fiscal 2024 (ended Apr 28) earnings of $8.53 per share, beating the Zacks Consensus Estimate of $7.86. The bottom line decreased 12% from the prior-year quarter on lower shipment volumes.
Net sales of equipment operations (comprising Agriculture, and Turf, Construction and Forestry) were $13.61 billion, down 15.4% year over year. However, net sales topped the Zacks Consensus Estimate of $13.25 billion. Total net sales (including financial services and others) were $15.24 billion, down 12.4% year over year.
Deere & Company Price, Consensus and EPS Surprise
Deere & Company price-consensus-eps-surprise-chart | Deere & Company Quote
Operational Update
The cost of sales in the reported quarter was down 14.7% year over year to $9.16 billion. Total gross profit decreased 16.8% year over year to $4.45 billion. Selling, administrative and general expenses fell 4.9% to $1.27 billion from the prior-year period.
Total operating profit (including financial services) was down 20.5% year over year to $3.1 billion in the fiscal second quarter.
Segment Performance
The Production & Precision Agriculture segment’s sales fell 16% year over year to $6.53 billion primarily due to lower shipment volumes, partially offset by price realization. The figure beat our model’s estimated revenues of $5.75 billion for the quarter. Operating profit decreased 24% year over year to $1.65 billion. Our estimate for the segment’s operating profit was $1.34 billion.
Small Agriculture & Turf sales fell 23% to $3.19 billion from the year-earlier quarter. Our projection for the segment’s sales was $3.65 billion. Segmental sales were impacted by lower shipment volume, which was partially negated by price realization. Operating profit fell 33% year over year to $571 million. The figure lagged our estimate of operating profit of $609 million for the segment.
Construction & Forestry sales were $3.84 million, down 7% year over year. The figure surpassed our projection of $3.66 billion. Operating profit decreased 20% year over year to $668 million. The downside was driven by lower shipment volumes and higher expenses. Our estimate for the segment’s operating profit was $690 million.
Revenues in Deere’s Financial Services division were $1.4 billion in the reported quarter, up 26% year over year. The figure surpassed our estimate of $1.06 billion. Net income of Deere’s Financial Services division was $162 million in the reported quarter compared with $28 million in the prior-year quarter. The upside was driven by income earned on higher average portfolio balances.
Financial Update
Deere reported cash and cash equivalents of $5.6 billion at the end of second-quarter fiscal 2024 compared with $7.5 billion at the end of fiscal 2023. Cash flow from operating activities was $944 million in the first half of fiscal 2024 versus an outflow of $147 million in the prior-year period. At the end of the quarter, the long-term borrowing was nearly $41 billion compared with $36 billion at the year-ago quarter’s end.
Guidance
Deere expects net income for fiscal 2024 to be $7 billion, down from the prior stated $7.50-$7.75 billion. The updated view suggests a decline from the net income attributable of $10.2 billion reported in fiscal 2023.
Net sales for Production & Precision Agriculture are expected to decrease 20-25% year over year in fiscal 2024 from the prior-stated decline of 20%. Sales of Small Agriculture & Turf are expected to dip 20-25% compared with the prior stated decrease of 10-15%. Sales of Construction & Forestry are projected to be down 5-10%. The Financial Services segment’s net income is expected to be $770 million.
Price Performance
DE shares have gained 14% in the past year compared with the industry’s growth of 8.5%.
Image Source: Zacks Investment Research
Zacks Rank
Deere currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performances of Other Farm Equipment Stocks
Let us take a look at how the other farm equipment stocks performed in the January-March quarter.
AGCO Corp. AGCO delivered an adjusted EPS of $2.32 in first-quarter 2024 compared with the prior-year quarter’s $3.51. The reported figure topped the Zacks Consensus Estimate of $2.29.
Revenues of AGCO decreased 12.1% year over year to $2.93 billion in the March-end quarter. The top line missed the Zacks Consensus Estimate of $2.99 billion. Excluding the favorable currency-translation impacts of 1%, net sales fell 13.1% year over year.
CNH Industrial N.V. CNHI came out with first-quarter 2024 earnings of 33 cents per share, beating the Zacks Consensus Estimate of 26 cents. This compares to earnings of 35 cents a year ago.
CNHI posted revenues of $4.82 billion for the quarter ended March 2024, surpassing the Zacks Consensus Estimate of $4.64 billion. The top line decreased 9.8% year over year.
Alamo Group Inc. ALG reported first-quarter 2024 adjusted earnings per share of $2.67, which beat the Zacks Consensus Estimate of $2.66. The bottom line of ALG increased 4% year over year.
Revenues in the reported quarter increased 3.4% year over year to $426 million.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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