eBusiness Weekly
Deere & Co cut its 2024 profit forecast on Thursday as farmers remained hesitant about big-ticket equipment purchases due to high borrowing rates and falling crop prices, even as its first-quarter sales and profit topped Wall Street estimates.
Shares of the world’s largest farm equipment maker were down 2,6 percent in premarket trading. With farmers reassessing expenses, particularly for compact tractors, Deere said it now expects net income for fiscal 2024 of US$7,5 billion to US$7,75 billion.
This is below its prior forecast of US$7,75 billion to US$8,25 billion and below analysts predictions of US$7,93 billion, which already marked a decline from the prior quarter.
‘‘That’s not particularly unusual for the first year of a market correction,’’ said Stephen Volkmann, senior machinery analyst at Jefferies.
‘‘The lower guidance that they put out is just a factor of that lower large agriculture outlook.’’
Deere, a barometer of the global economy, said operating margins contracted due to lower sales for large agriculture equipment which the company is expecting to decline 20 percent this year. Operating profit across its equipment divisions fell 13 percent in aggregate.
Executives have expressed caution about margin performance amid a weakening farm economy, and said Deere intends to cut equipment production in 2024.
Rival CNH Industrial has also tempered investor expectations even after posting better than expected profit for the fourth-quarter, saying softening commodity prices will lead to a downturn in farm equipment demand.
Net farm income in the US is set to fall 27 percent this year to US$116 billion, from its inflation-adjusted total in 2023, according to the US Department of Agriculture.
US grains and soyabean are at three-year lows and face stiff competition for export business from South America and the Black Sea region, translating to tighter balance sheets for growers and causing them to pull back on new equipment purchases.
Deere’s sales for production and precision agriculture equipment, it’s largest division, declined 7 percent year-over-year in the fiscal first quarter. Revenue for equipment operations fell 8 percent to US$10,5 billion year over year, but topped consensus forecasts of US$10,3 billion.
Net income fell to US$1,75 billion, or US$6,23 per share, for the first quarter, beating analysts estimates of US$5,21 per share, according to LSEG data. — Reuters
