In a Surprise, Deere Keeps Outlook Despite Weak Market
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Deere & Co. unexpectedly maintained its annual profit outlook as the world’s top tractor maker sought to cut costs in a slumping farm economy.
The Moline, Ill.-based company said net income for the current fiscal year would be about $7 billion, on par with its outlook in May and above the Bloomberg estimate for $6.94 billion. That’s as the company reported third-quarter net income of $1.73 billion, above an estimate for $1.59 billion.
Shares were up 2.2% at 7:53 a.m. in premarket trading in New York, after jumping as much as 5% earlier.
Deere, a bellwether of the American economy that’s been operating since 1837, has laid off workers as demand for its farm machines has been falling from record levels two years ago. Deere also retreated from diversity efforts after pressure from conservative activists.
Analysts expected the company to cut its outlook for the third straight quarter after rival AGCO Corp. trimmed $1 billion from its outlook in July. Instead, Deere kept its guidance unchanged, even with the company’s global net sales slumping 17% in its fiscal third quarter.
“In response to weak market conditions, we have taken steps to reduce costs and strategically align our production with customer needs,” Deere Chief Executive Officer John May said in a statement Aug. 15. “Although these decisions were difficult, they are vital for our continued success and competitiveness.”
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Crop prices have been hovering around the lowest levels since 2020, giving farmers less to invest in new equipment or land. Still, the U.S. Department of Agriculture projects that yields for corn and soybeans, the two most widely grown American crops, will be at record highs this year, leaving growers with more bushels to sell.
The company sees sales this year in North America to be about 15% lower and down by 15% to 20% in South America. At the same time, it expects prices for production-agriculture machinery for fiscal 2024 to be about 2% higher, slightly better than its May outlook for gains of 1.5%.
