2 days ago
Tariffs Take A Bite Out Of Deere Profit, Demand Challenges Hit Core Businesses (UPDATED)
Deere & Company (NYSE:DE) shares tumbled Thursday after the agricultural equipment giant posted mixed third-quarter results and trimmed its full-year profit forecast, highlighting persistent headwinds from declining sales, tariffs, and cautious customer demand.
The heavy machinery maker reported earnings per share of $4.75, beating the consensus of $4.67. It reported a 9% decline in quarterly sales to $12.02 billion, beating the consensus of $10.31 billion.
Production and precision agriculture sales decreased 16% for the quarter to $4.27 billion as a result of lower shipment volumes and unfavorable price realization. Operating profit slumped 50% to $580 million primarily due to lower shipment volumes / sales agriculture and turf sales decreased 1% to $3.03 billion due to lower shipment volumes, partially offset by favorable currency translation and price realization.
Operating profit decreased 2% to $485 million due to higher tariffs, partially offset by reductions in warranty expenses and lower production costs. The decreased production costs were primarily the result of lower material costs.
Construction and forestry sales decreased 5% to $3.06 billion due to unfavorable price realization. Operating profit decreased 47% to $237 million primarily due to unfavorable price realization and higher production costs caused by higher tariffs, partially offset by a favorable product mix.
'By proactively managing inventory, we've matched production to retail demand, enabling our company and dealers to respond swiftly to market shifts and customer needs,' said John May, chairman and CEO of John Deere.
'By continuing to address the high levels of used equipment in the industry, we're building a healthier market for everyone, our customers, our dealers, and our business, even in these challenging times,' May added.
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Deere's financial services reported a net income increasing 34% to $205 million, driven by a lower provision for credit losses.
Outlook
Deere narrowed its fiscal 2025 net income guidance to between $4.75 billion and $5.25 billion, compared to its previous forecast of $4.75 billion to $5.50 billion, citing that customers remain cautious amid ongoing uncertainty.
'We remain committed to delivering solutions that address our customers' current needs while also laying the groundwork for future growth. For example, the increasing utilization and proven in-field effectiveness of advanced technologies, such as See & Spray and Harvest Settings Automation, are empowering customers to improve their productivity and better navigate industry challenges,' May noted. 'The positive outcomes we're enabling reinforce our confidence in Deere's future despite near-term uncertainty.'
For fiscal 2025, Deere expects production and precision agriculture sales to decline between 15% and 20%, with small agriculture and turf revenues to fall by around 10% and construction and forestry sales to decline by 10%-15%.
During the earnings conference call, Deere executives reportedly said tariff costs during the third quarter were about $200 million, with the pre-tariff impact forecast for 2025 now approaching $600 million.
They also noted more uncertainty in the North American agricultural market and confirmed the company will continue to run factories lean to match demand.
When looking at the industry, for fiscal 2025, Deere expects the U.S. and Canada large agriculture equipment sales to decline approximately 30%, while small agriculture and turf equipment sales are projected to decrease around 10%.
The company sees U.S. and Canada construction equipment sales to fall by around 10%.
Price Action: DE stock is trading lower by 6.49% to $480.22 at last check Thursday.
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