Deere & Co. ($DE) has confidently upheld its guidance for full-year net income, even as the company's fiscal third-quarter results showed a year-over-year decline. Despite the challenges presented by weak market conditions, Deere's performance exceeded Wall Street's expectations. The iconic manufacturer of agricultural machinery, including tractors, mowers, and combines, forecasts a net income of $7 billion for the year 2024, a figure that is just above analysts' consensus on Capital IQ, which stands at $6.94 billion.
The company's net income for the most recent quarter dropped significantly by 42%, landing at $1.73 billion. However, this still surpassed Street predictions, which estimated net earnings of $1.6 billion. Following this announcement, Deere's stock saw an uptick of nearly 3% in post-market trading. In a recent statement, Chief Executive John May remarked, "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." In a recent report, it was highlighted that Deere is set to reduce its workforce by cutting 600 jobs across three manufacturing plants in the United States as it transitions production to a newly established facility in Mexico. Despite the net income outlook, Deere anticipates declines in several of its business sectors throughout the year.
The company has revised its sales decline forecast for construction and forestry equipment from an earlier projected drop of 5% to 10% to a more significant range of 10% to 15%. Additionally, both production and precision agriculture sectors, along with small agriculture and turf markets, are now expected to experience sales declines of 20% to 25% for the fiscal year 2024.
For financial services, net income is anticipated to be around $720 million, a reduction from the previous guidance of $770 million provided back in May. Analyzing the sales performance for the three months ending July 28, Deere reported a decrease in sales revenue to $11.39 billion, down from $14.28 billion during the same period last year.
Despite this downturn, the results still exceeded analysts' expectations of $10.79 billion. The company's earnings per share (EPS) also reflected a slowdown, dropping to $6.29 from $10.20 earlier. The Capital IQ consensus had predicted an EPS of $5.64. Deere concluded that the global agriculture fundamentals are likely to remain weak as construction activity moderates.
Specifically, sales within the production and precision agriculture segments fell 25% to $5.1 billion in the third quarter, a drop attributed to declining shipment volumes. Furthermore, both small agriculture and turf sales dropped by 18% to $3.05 billion, while sales in the construction and forestry segments sank 13% to $3.24 billion due to falling shipment rates. Financial services experienced a significant downturn as income dropped 29% in the three months to just $156 million, attributed to a higher provision for credit losses and less favorable financing spreads.
Additionally, it was reported last week that Brazil's Banco Bradesco will be investing in Banco John Deere, thus acquiring a 50% stake in the financing branch within the South American region. Deere described this transaction as a means to support continued investments in this critical growth market. With the stock price currently positioned at $354.00, reflecting a change of +2.72, equivalent to a percent change of +0.77.
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