Deere recently reported its Q2 fiscal 2024 results, with revenues and earnings exceeding street estimates. The company reported equipment revenue of $13.6 billion and earnings of $8.53 per share, compared to consensus estimates of $13.3 billion and $7.86, respectively. However, Deere provided a bleak outlook, with net income now expected to be around $7 billion, lower than its prior outlook of $7.5 billion to $7.75 billion. This news caused its stock to fall around 5% on May 16, despite strong gains in the past three years.
DE stock has seen significant gains from early 2021 to now, outperforming the S&P 500 over this period. However, the stock’s performance has been volatile, with declines in 2023 causing it to underperform the index. Given the current economic environment, uncertainty in the market could lead to DE facing challenges in the next 12 months. From a valuation perspective, DE stock appears to be appropriately priced, with a forecast of $382 per share close to its current market price of $395.
In Q2, Deere saw a 15% decrease in revenue year-over-year, with declines in various segments including construction, forestry, production, precision agriculture, and small agriculture and turf sales. Despite benefiting from a strong pricing environment, the company experienced a decrease in equipment volume. Profit also fell by 17% from the prior year quarter, with lower operating margins across segments. Looking ahead, Deere expects a decline in sales for all manufacturing segments in 2024 as its business is cyclical.
Deere’s stock may continue to face challenges in the near term, with headwinds such as falling commodity prices and elevated interest rates impacting its sales volume. While the stock appears to be fully valued, it is important to consider how Deere’s peers are performing on important metrics. By comparing Deere to its industry peers, investors can gain valuable insights into the company’s position within the market and make more informed investment decisions.
