Deere Q3 Earnings: Profit Beats Expectations Despite Sales Drop, Reaffirms Full-Year Net Income Outlook – Deere (NYSE:DE)

Deere & Co. DE The company’s shares are trading higher after it reported third-quarter results and reaffirmed its 2024 net income guidance.

The company’s net sales and revenue fell 17% year over year to $13.152 billion, beating the consensus of $10.944 billion.

Net sales in the Manufacturing and Precision Agriculture segment decreased 25% year-over-year to $5.099 billion, net sales in the Small Agriculture and Landscape segment decreased 18% to $3.053 billion, and revenue in the Construction and Forestry segment decreased 13% to $3.235 billion due to lower shipment volumes.

Financial services revenue rose 21% year over year to $1.489 billion, while net income declined to $153 million from $216 million a year earlier, due to higher credit loss provisions and less favorable financial spreads.

John Deere’s third-quarter results demonstrate the company’s disciplined approach to challenging conditions in the global agriculture and construction sectors, said CEO John C. May.

Operating profit fell 34.7% year-on-year to $2.279 billion, with margin shrinking 480 basis points to 17.5%.

Deere reported earnings per share of $6.29, down from $10.20 year over year and beating the consensus estimate of $5.85.

Segment operating margins: Manufacturing and precision farming 22.8%, down 26.2% year-on-year; Small farming and turf 16.2%, down 19.6% year-on-year; Construction and forestry 13.8%, down 19.1%.

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As of July 28, Deere had more than $7 billion in cash and equivalents. DE’s net cash provided by operating activities for the nine months ended July 28 was $4.139 billion, compared to cash used of $2.896 billion a year earlier.

During the quarter, the company initiated employee severance programs in several regions to streamline operations. These programs resulted in $124 million in pretax expense out of an estimated total expense of $150 million.

Guidelines for 2024: Deere reaffirmed its 2024 net income guidance of $7.00 billion.

“In response to the weak market, we have taken steps to reduce costs and strategically align our production with customer needs,” May said.

For 2024, Deere projects that net sales in the Production and Precision Agriculture segment will decline approximately 20%-25% with a realization price of +2%; net sales in the Light Agriculture and Turf Care segment will decline 20%-25% with a realization price of +2%; and net sales in the Construction and Forestry segment will decline 10%-15% with a realization price of +0.5%.

The company expects financial services net income to be $720 million for the fiscal year.

Price action: DE shares were up 1.15% to $355.31 before the open at last check on Thursday.

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