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Deere (DE) Q3 Earnings Top Estimates, Fall Y/Y on Low Volumes
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Deere & Company (DE - Free Report) reported third-quarter fiscal 2024 (ended Jul 28) earnings of $6.29 per share, which beat the Zacks Consensus Estimate of $5.80. The bottom line, however, plunged 38% from the prior year quarter.
This was mainly due to lower shipment volumes across all segments, reflecting weak demand. This was somewhat negated by the company’s pricing strategies and cost-saving measures.
Net sales of equipment operations (comprising Agriculture, and Turf, Construction and Forestry) were $11.39 billion, down 19.9% year over year. However, net sales topped the Zacks Consensus Estimate of $10.87 billion. Total net sales (including financial services and others) were $13.15 billion, down 16.8% year over year.
The cost of sales in the reported quarter was down 18.5% year over year to $7.85 billion. Total gross profit decreased 14% year over year to $5.3 billion. Selling, administrative and general expenses rose 15% to $1.28 billion from the prior-year period.
Total operating profit (including financial services) slumped 35% year over year to $2.3 billion in the fiscal third quarter.
Segment Performance
The Production & Precision Agriculture segment’s sales fell 25% year over year to $5.1 billion, primarily due to lower shipment volumes, partially offset by price realization. The figure beat our model’s estimated revenues of $4.8 billion for the quarter.
Operating profit decreased 35% year over year to $1.16 billion attributed to lower shipment volumes and employee-separation programs’ expenses. Our estimate for the segment’s operating profit was $0.9 billion.
Small Agriculture & Turf sales fell 18% to $3.05 billion from the year-earlier quarter but were higher than our projected sales of $2.85 billion. Segmental sales were impacted by lower shipment volume, which was partially offset by favorable price realization.
Operating profit fell 32% year over year to $496 million due to lower shipment volumes and higher warranty expenses, partially offset by price realization. The figure beat our estimate of operating profit of $456 million for the segment.
Construction & Forestry sales were $3.2 million, down 13% year over year, reflecting lower volumes. The reported figure was in line with our estimate. Operating profit decreased 20% year over year to $668 million on lower shipment volumes and higher expenses. Our estimate for the segment’s operating profit was $634 million.
Revenues in Deere’s Financial Services division were $1.49 billion in the reported quarter, up 21% year over year. Our estimate for the segment’s revenues was $1.5 billion. Net income of Deere’s Financial Services division was $153 million in the reported quarter compared with $216 million in the prior-year quarter. The downside was due to a higher provision for credit losses and less favorable financing spreads, partially offset by income earned on higher average portfolio balances and favorable discrete tax items.
Cash & Debt Position
Deere reported cash and cash equivalents of $7 billion for the third quarter of fiscal 2024 compared with $7.5 billion at the end of fiscal 2023. Cash flow from operating activities was $4.1 billion in the first nine-month period of fiscal 2024 compared with $2.9 billion in the prior-year comparable period.
At the end of the quarter, the long-term borrowing was nearly $42.7 billion compared with $38.5 billion at the year-ago quarter’s end.
Guidance
Deere stated that in the wake of challenging conditions in the global agricultural and construction sectors, the company will align its production with demand levels and also take steps to reduce costs. Deere maintained its guidance of net income for fiscal 2024 at $7 billion. The view suggests a 31% decline from net income of $10.2 billion reported in fiscal 2023.
Net sales for Production & Precision Agriculture are expected to decrease 20-25% year over year in fiscal 2024. Sales of Small Agriculture & Turf are expected to dip 20-25%. Deere projects sales of Construction & Forestry to be down 10-15%. The Financial Services segment’s net income is expected to be $720 million.
Price Performance
DE shares have fallen 18.6% in the past year compared with the industry’s decline of 19.5%.
Let us take a look at how other farm equipment stocks fared in their earnings releases.
AGCO Corp. (AGCO - Free Report) delivered an adjusted earnings per share of $2.53 in second-quarter 2024 compared with the prior-year quarter’s $4.29. The reported figure missed the Zacks Consensus Estimate of $2.88.
Revenues decreased 15.1% year over year to $3.25 billion in the quarter. The top line missed the Zacks Consensus Estimate of $3.49 billion. Excluding the unfavorable currency-translation impacts of 0.9%, net sales fell 14.2% year over year.
AGCO lowered the adjusted EPS projection to around $8.00 for 2024 from the previously stated $12.00.
CNH Industrial N.V. (CNH - Free Report) came out with second-quarter 2024 earnings of 38 cents per share, in line with the Zacks Consensus Estimate. The bottom-line figure marked a 27% decline from the year-ago quarter.
CNH posted revenues of $5.49 billion for the quarter ended June 2024, missing the Zacks Consensus Estimate of $5.64 billion. The top line decreased 16.4% year over year. Adjusted earnings per share are expected to be between $1.30 and $1.40 in 2024, revised downward from its previous range of $1.45 -$1.55 due to weak demand in agriculture and construction equipment markets.
Lindsay Corporation (LNN - Free Report) delivered third-quarter fiscal 2024 (ended on May 31, 2024) adjusted earnings per share of $1.41, beating the Zacks Consensus Estimate of $1.25. The bottom line fell 8% year over year.
LNN generated revenues of $139 million, down 15.4% from $165 million reported in the year-ago quarter. The top line missed the Zacks Consensus Estimate of $152 million.
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Deere (DE) Q3 Earnings Top Estimates, Fall Y/Y on Low Volumes
Deere & Company (DE - Free Report) reported third-quarter fiscal 2024 (ended Jul 28) earnings of $6.29 per share, which beat the Zacks Consensus Estimate of $5.80. The bottom line, however, plunged 38% from the prior year quarter.
This was mainly due to lower shipment volumes across all segments, reflecting weak demand. This was somewhat negated by the company’s pricing strategies and cost-saving measures.
Net sales of equipment operations (comprising Agriculture, and Turf, Construction and Forestry) were $11.39 billion, down 19.9% year over year. However, net sales topped the Zacks Consensus Estimate of $10.87 billion. Total net sales (including financial services and others) were $13.15 billion, down 16.8% year over year.
Deere & Company Price, Consensus and EPS Surprise
Deere & Company price-consensus-eps-surprise-chart | Deere & Company Quote
Operational Update
The cost of sales in the reported quarter was down 18.5% year over year to $7.85 billion. Total gross profit decreased 14% year over year to $5.3 billion. Selling, administrative and general expenses rose 15% to $1.28 billion from the prior-year period.
Total operating profit (including financial services) slumped 35% year over year to $2.3 billion in the fiscal third quarter.
Segment Performance
The Production & Precision Agriculture segment’s sales fell 25% year over year to $5.1 billion, primarily due to lower shipment volumes, partially offset by price realization. The figure beat our model’s estimated revenues of $4.8 billion for the quarter.
Operating profit decreased 35% year over year to $1.16 billion attributed to lower shipment volumes and employee-separation programs’ expenses. Our estimate for the segment’s operating profit was $0.9 billion.
Small Agriculture & Turf sales fell 18% to $3.05 billion from the year-earlier quarter but were higher than our projected sales of $2.85 billion. Segmental sales were impacted by lower shipment volume, which was partially offset by favorable price realization.
Operating profit fell 32% year over year to $496 million due to lower shipment volumes and higher warranty expenses, partially offset by price realization. The figure beat our estimate of operating profit of $456 million for the segment.
Construction & Forestry sales were $3.2 million, down 13% year over year, reflecting lower volumes. The reported figure was in line with our estimate. Operating profit decreased 20% year over year to $668 million on lower shipment volumes and higher expenses. Our estimate for the segment’s operating profit was $634 million.
Revenues in Deere’s Financial Services division were $1.49 billion in the reported quarter, up 21% year over year. Our estimate for the segment’s revenues was $1.5 billion. Net income of Deere’s Financial Services division was $153 million in the reported quarter compared with $216 million in the prior-year quarter. The downside was due to a higher provision for credit losses and less favorable financing spreads, partially offset by income earned on higher average portfolio balances and favorable discrete tax items.
Cash & Debt Position
Deere reported cash and cash equivalents of $7 billion for the third quarter of fiscal 2024 compared with $7.5 billion at the end of fiscal 2023. Cash flow from operating activities was $4.1 billion in the first nine-month period of fiscal 2024 compared with $2.9 billion in the prior-year comparable period.
At the end of the quarter, the long-term borrowing was nearly $42.7 billion compared with $38.5 billion at the year-ago quarter’s end.
Guidance
Deere stated that in the wake of challenging conditions in the global agricultural and construction sectors, the company will align its production with demand levels and also take steps to reduce costs. Deere maintained its guidance of net income for fiscal 2024 at $7 billion. The view suggests a 31% decline from net income of $10.2 billion reported in fiscal 2023.
Net sales for Production & Precision Agriculture are expected to decrease 20-25% year over year in fiscal 2024. Sales of Small Agriculture & Turf are expected to dip 20-25%. Deere projects sales of Construction & Forestry to be down 10-15%. The Financial Services segment’s net income is expected to be $720 million.
Price Performance
DE shares have fallen 18.6% in the past year compared with the industry’s decline of 19.5%.
Image Source: Zacks Investment Research
Zacks Rank
Deere currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performances of Other Farm Equipment Stocks
Let us take a look at how other farm equipment stocks fared in their earnings releases.
AGCO Corp. (AGCO - Free Report) delivered an adjusted earnings per share of $2.53 in second-quarter 2024 compared with the prior-year quarter’s $4.29. The reported figure missed the Zacks Consensus Estimate of $2.88.
Revenues decreased 15.1% year over year to $3.25 billion in the quarter. The top line missed the Zacks Consensus Estimate of $3.49 billion. Excluding the unfavorable currency-translation impacts of 0.9%, net sales fell 14.2% year over year.
AGCO lowered the adjusted EPS projection to around $8.00 for 2024 from the previously stated $12.00.
CNH Industrial N.V. (CNH - Free Report) came out with second-quarter 2024 earnings of 38 cents per share, in line with the Zacks Consensus Estimate. The bottom-line figure marked a 27% decline from the year-ago quarter.
CNH posted revenues of $5.49 billion for the quarter ended June 2024, missing the Zacks Consensus Estimate of $5.64 billion. The top line decreased 16.4% year over year. Adjusted earnings per share are expected to be between $1.30 and $1.40 in 2024, revised downward from its previous range of $1.45 -$1.55 due to weak demand in agriculture and construction equipment markets.
Lindsay Corporation (LNN - Free Report) delivered third-quarter fiscal 2024 (ended on May 31, 2024) adjusted earnings per share of $1.41, beating the Zacks Consensus Estimate of $1.25. The bottom line fell 8% year over year.
LNN generated revenues of $139 million, down 15.4% from $165 million reported in the year-ago quarter. The top line missed the Zacks Consensus Estimate of $152 million.