Why Heavy Equipment Maker Deere Shares Are Taking A Hit Today

Deere & Co DE reported first-quarter fiscal 2024 net sales and revenue decline of 4% year-over-year to $12.185 billion, beating the consensus of $10.33 billion.

Production & Precision Agriculture net sales declined 7% Y/Y to $4.85 billion, and Small Agriculture & Turf net sales fell 19% Y/Y to $2.425 billion due to lower shipment volumes.

Meanwhile, Construction & Forestry revenue was flat YoY to $3.21 billion, reflecting positive price realization offset by lower shipment volumes.

Financial services revenues grew 32% YoY to $1.376 billion, and net income was up 12% to $207 million, reflecting higher average portfolio balances.

Operating profit fell 13% Y/Y to $2.194 billion. EPS of $6.23, down from $6.55 YoY, beating the consensus of $5.33.

Segment operating margins: Production & Precision Agriculture 21.6%, down YoY from 23.2%; Small Agriculture & Turf 13.4%, down YoY from 14.9%; Construction & Forestry 17.6%, down YoY from 19.5%.

Deere held over $6.3 billion in cash and cash equivalents as of January 28, 2024. DE’s net cash used in operating activities for the quarter was $(908) million, compared to $(1.246) billion a year ago.

“Moving forward, we expect fleet replenishment to moderate as agricultural fundamentals normalize from record levels in 2022 and 2023,” said John C. May, chairman and chief executive officer. “Regardless of where we are in the cycle, demand is accelerating for products and solutions that empower our customers to do more with less, and we are uniquely positioned to deliver unparalleled value to our customers.”

2024 Guidance: Deere lowered its 2024 net income outlook to $7.50 billion-$7.75 billion (prior $7.75 billion-$8.25 billion).

Deere expects 2024 Production & Precision Ag net sales to decline by ~20% and price realization of +1.5%; Small Ag & Turf net sales to fall by 10%-15% and price realization of +1.5%; and Construction & Forestry net sales to decrease by 5%-10% and price realization of +1.5%.

The company sees Financial services net income of $770 million for the fiscal.

Price Action: DE shares are down 4.4% at $367.57 on the last check Thursday.

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