John Deere released stronger than anticipated third-quarter earnings today, Aug. 18, that once again beat Wall Street estimates and further brightened the Moline-based equipment maker’s full-year outlook for fiscal 2023.
In its Q3 earnings report, the global agricultural and construction equipment giant reported net income of $2.978 billion, or $10.20 per share, for the three-month period that ended July 30. That compared with $1.884 billion, or $6.16 per share, for the quarter ended July 31, 2022.
Deere & Co.’s third-quarter results not only out-paced Wall Street estimates for net profit in the quarter, the company also increased its economic expectations for fiscal 2023 well above analysts’ earlier estimates.
Worldwide sales and revenue also rose 12% to $15.801 billion, ahead of the $14.143 billion consensus estimate from market analysts.
“Reflected by our strong third-quarter results, Deere continues to benefit from favorable market conditions and an operating environment showing further improvement,” Deere & Co. Chairman and CEO John May said.
“We are also being helped by stabilizing conditions in the supply chain, the sound execution of our business plans, and an improving ability to meet demand for our products and serve customers,” he added in today’s earnings news release.
On the strength of those earnings, Deere also upped its profit estimates for fiscal year 2023 to be in the range of $9.75 billion to $10 billion, ahead of analyst’s $9.407 billion projection. In May 2023, the company’s 2Q report set the fiscal 2023 profit range at $9.25 million to $9.5 billion, and three months earlier it was in the $8.75 billion to $9.25 billion range.
Despite those results and increased projections, Deere & Co. (DE) stock prices fell in early trading today. For example, Deere shares were trading on the New York Stock Exchange for $402.17 at 11 a.m., down from $419.16 at the close of NYSE business Thursday. Aug. 17.
Barron’s Senior Writer Al Root attributed the decline in stock prices to investor concerns that the current high demand for agricultural equipment is over.
Deere’s third-quarter earnings report did not echo those concerns. The company said that for the first nine months of the year, net income was $7.797 billion, or $26.35 per share, compared with $4.885 billion, or $15.88 per share, for the same period last year. Net sales were $41.765 billion for the first nine months, compared with $33.565 billion for the same period last year.
“Deere is well on the way to another year of exceptional achievement due in large part to positive fundamentals in the farm and construction sectors and the unwavering commitment of the Deere team, including our dealers and suppliers,” Mr. May added. “Fundamentals are expected to continue fueling solid demand for our equipment, supported by a strong advance-order position. At the same time, through the company’s smart industrial operating model, we are delivering differentiated value to our customers, enabling them to do their jobs more profitably and sustainably.”
Other highlights in the Q3 2023 report, according to John Deere, were that “sound execution contributed to 10% increase in net sales and higher earnings,” and that trong order books and positive industry fundamentals are driving strong results.”
Q3 report by division:
- Production & Precision Agriculture – Sales of large farm equipment increased for the quarter to $6.806 billion, an increase of 12%, from $6.096 billion a year ago. The increase was attributed to improved shipment volumes and price realization. Operating profit this quarter also rose to $1.782 billion in 2023 compared to $1.293 billion in third quarter 2022. Those items were partially offset by higher production costs, increased operating costs, research and development expenses and unfavorable foreign currency exchange.
- Small Agriculture & Turf – Sales rose 3% to $3.739 billion in the quarter, up from $3.635 billion a year ago. Sales increased due to price realization, partially offset by the higher production costs, lower shipment volumes, increased operating costs, research and development expenses and negative effects of currency translation.
- Construction & Forestry – Sales of construction and forestry equipment increased 14% in the quarter to $3.739 billion, compared to $3.269 billion in the same period last year. The increase was credited to price realization and higher shipment volumes, which were partially offset by negative effects of higher production costs, increased operating costs, research and development expenses and unfavorable foreign currency exchange.
- Financial Services – The division’s net income for the quarter increased $216 million up 3% from $209 million a year ago. Net income from the financial services division is forecast to be $630 million in fiscal year 2023. Results are expected to be lower than 2022 due to less-favorable financial spreads, a correction of the accounting treatment for financing incentives offered to Deere dealers, a higher provision for credit losses, higher operating costs and lower gains on operating-lease dispositions. Those factors are expected to be partially offset by income earned on a higher average portfolio.
Additional financial information from Deere & Co.s’ 2023 second quarter report is available in this PDF version of the company’s news release.
