Deere & Co. (DE) stock falls on guidance cut despite earnings beat
Deere & Co. (NYSE: DE) reported a notable second-quarter earnings beat on Thursday, but shares fell, currently down over 3%, as the company cut its full-year net income forecast, signaling caution amid softening global agricultural demand and stable construction markets.
The world's leading tractor manufacturer posted adjusted earnings per share (EPS) of $8.53 for the quarter, surpassing analysts' expectations of $7.87. Revenue also exceeded forecasts, coming in at $15.24 billion against the consensus estimate of $13.3 billion. Despite the strong performance, the company's revised full-year net income forecast to approximately $7.0 billion, down from the previous range of $7.5-7.75 billion, appeared to weigh heavily on investor sentiment.
Comparing year-over-year figures, Deere's second-quarter net income fell from $2.860 billion, or $9.65 per share, in 2023 to $2.370 billion, or $8.53 per share, in 2024. This decline was mirrored in a 12% drop in worldwide net sales and revenues for the quarter, down from $16.079 billion last year to $13.610 billion.
"John Deere’s second-quarter results were noteworthy in light of continued changes across the global agricultural sector," stated John May, chairman and chief executive officer. He highlighted the company's higher performance levels across business cycles and stability in construction end markets despite declining agricultural and turf demand.
The company's performance in different segments varied, with production and precision agriculture sales decreasing due to lower shipment volumes, though partially offset by price realization. Small agriculture and turf sales also saw a downturn for similar reasons.
The construction and forestry segment experienced decreased sales and operating profit, attributed to lower shipment volumes and higher expenses.
However, Deere's financial services net income for the quarter saw an increase, benefiting from income earned on higher average portfolio balances, despite a higher provision for credit losses and less favorable financing spreads.
Looking ahead, Deere is actively managing production and inventory levels to adapt to demand changes.
"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," May added.
Following the report, analysts at Stifel said the "most notable guidance shift was in SA&T sales, which are now expected to be down 20-25% y/y compared to down 10-15% previously."
"Sales guidance was also reduced for P&PA, but maintained for C&F. DE reduced net Income guidance to $7.0B from $7.5-7.75B due to these lower volume expectations," wrote the firm. "Looking ahead, we expect the ag machinery environment to remain dynamic, as indicated by our survey. That said, we think this ag downturn will be less severe than prior cycles due to less leasing activity (here) and for DE’s profitability will hold up much better."
Meanwhile, Morgan Stanley told investors they expected a modestly negative stock reaction to DE's F2Q24 EPS beat, but lowered FY24 net income outlook. They believe the outlook "implies sharply lower F2H results yoy, with shares to ultimately cue off of management commentary as a cut was
already broadly expected following peers results."