Deere & Co. again lowered its full-year outlook for net income as demand for its green machines further softens and farmers face economic pressures from falling crop prices and rising interest rates. In its earnings report, released today, May 16, Deere reported net income of $2.370 billion for the second quarter, ended April 28, compared […]
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Deere & Co. again lowered its full-year outlook for net income as demand for its green machines further softens and farmers face economic pressures from falling crop prices and rising interest rates.
In its earnings report, released today, May 16, Deere reported net income of $2.370 billion for the second quarter, ended April 28, compared with net income of $2.860 billion for the same quarter last year.
For the first six months of the fiscal year, net income was $4.121 billion, which compared with $4.819 billion, for the same period in 2023.
Deere now is forecasting its full-year net income to be $7 billion – down from its previous estimated range of $7.5 billion to $7.75 billion. The Moline-based company also had lowered its forecast in its first quarter earnings report.
Deere’s earnings per share were $8.53 for the second quarter, compared with $9.65 a share a year ago. For the first six months, earnings per share were $14.74 compared with $16.18 per share for the same period last year.
The quarterly report sent Deere stock down 14.67% in trading this morning. As of noon, it was at $399.57 a share.
In its earnings release, Deere said worldwide net sales and revenues decreased 12% to $15.235 billion for the second quarter and decreased 9% to $27.420 billion for the fiscal year’s first six months.
Net sales were $13.610 billion for the quarter and $24.097 billion for the first six months, which compared with $16.079 billion and $27.481 billion respectively last year.
“John Deere’s second-quarter results were noteworthy in light of continued changes across the global agricultural sector,” Deere Chairman and CEO John May said in the release. “Thanks to the dedication and hard work of our team, we continue to demonstrate structurally higher performance levels across business cycles and are benefitting from stability in construction end markets amid declining agricultural and turf demand.”
For a second time, Deere also posted a video recapping its earnings update. The video, found here, includes a conversation between Josh Jepsen, senior vice president & chief financial officer, and Josh Beal, director, investor relations.
"Opportunities are greater in front of us” Josh Jepsen & Josh Beal Recap Q2 (deere.com)
The company’s lowered outlook comes as the U.S. Department of Agriculture is estimating net farm income will be about $116 billion – down from $156 billion in 2023. Meanwhile, corn prices are down 22% in the past 12 months and soybean prices have fallen 13%.
“We are proactively managing our production and inventory levels to adapt to demand changes and position the business for the future,” Mr. May added.
Net sales and revenues for John Deere production and precision ag products fell 16% in the quarter to $6.581 billion and fell 12% for the first six months to $11.430 billion.
Sales of John Deere small ag and turf equipment also declined. Deere reported sales decreased 23% in the second quarter to $3,185 billion, down from $4,145 billion a year ago. For the first six months, net sales of small ag and turf equipment declined 21% to $5.610 billion vs. $7.146 billion in the same period in 2023.
Deere said the construction industry remains stable. Sales in that division fell 7% in the quarter to $3.844 billion and were down 4% for the first six months to $7.057 billion.
“Despite market conditions, we are committed to our strategy and are actively investing in and deploying innovative technologies, products, and solutions to ensure our customers’ success,” Mr. May said in the release.
The world’s largest farm equipment maker also forecast fiscal year 2024 net income for its financial services operations to be about $770 million.
For the quarter, net income in this division was $162 million compared with $28 million in 2Q of 2023. The increase, the release said, was due to income earned on a higher average portfolio, which was partially offset by a higher provision for credit losses and less-favorable financing spreads.
Looking ahead, Deere expects sales of large ag equipment to decline between 20% and 25% this year. It previously forecast sales to be down about 15%. The industry outlook for large ag equipment sales in North America is to be down 15%.
Deere also estimates its net sales in large ag equipment and small ag and turf machines to both be down in a range of 20-25% for the fiscal year. John Deere construction and forestry equipment sales are expected to be down 5-10%, the release said. Industry sales are expected to be flat to down 5% in North America.
Deere’s second quarter earnings of $8.53 a share beat expectations on Wall Street, where the Zacks Consensus Estimate was $7.86 for the second quarter.
