Deere’s Fiscal Third Quarter Results Reveal Challenging Conditions in the Global Agricultural and Construction Sectors

Image Source: Deere & Company

By Brian Nelson, CFA

Deere & Company (DE) reported better than expected fiscal third quarter results on August 15 with revenue and GAAP earnings per share coming ahead of the consensus forecasts. Worldwide net sales and revenues fell 17% on a year-over-year basis, accelerating from the 11% fall through the first nine months of the year, but this was better than feared. Net income of $6.29 per share in the quarter fell from $10.20 per share in the quarter ended July 30, 2023. Net income dropped 42% on a year-over-year basis.

Management’s commentary was cautious in the press release:

John Deere’s third-quarter results showcase our disciplined execution in the face of challenging conditions in the global agricultural and construction sectors. Despite facing significant headwinds, our teams have demonstrated resiliency in adapting to market fluctuations, allowing us to remain focused on advancing our strategy and consistently providing exceptional value to our customers.

In response to weak market conditions, we have taken steps to reduce costs and strategically align our production with customer needs. Although these decisions were difficult, they are vital for our continued success and competitiveness. Our commitment to our customers is at the heart of everything we do, and we are confident that these proactive measures will allow us to continue investing in innovative, high-quality products and solutions that improve our customers’ lives.

Looking to all of fiscal 2024, Deere continues to expect weak top-line performance across its portfolio. Production & Precision Agriculture net sales are expected to fall 20%-25%, Small Ag & Turf net sales are expected to decline at a similar pace, while Construction & Forestry net revenues are expected to drop 10%-15% on the year. Financial Services net income is targeted at $720 million for fiscal 2024. Deere ended the quarter with a hefty net debt position. Though Deere’s top line continues to face pressure, and its balance sheet isn’t as strong as we would like, management did reaffirm its net income outlook for fiscal 2024 at approximately $7 billion, which was above the consensus forecast. Shares of Deere yield 1.6%.

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