Deere rallies as Q3 earnings top estimates, outlook not as bad as feared

Deere (NYSE:DE) +6.8% in Thursday’s trading, on pace for its biggest percentage gain YTD, after easily beating Q3 earnings estimates and maintaining its full-year profit outlook, as stronger pricing and cost control measures protected margins from sluggish demand.

Q3 net income fell to $1.73B for the period ended July 28, or $6.29/share, from $2.98B, or $10.20/share, for the year-ago quarter ended July 30, as revenues fell 17% Y/Y to $13.15B, due to lower shipment volumes partially offset by price realization, but still came in ahead of expectations.

Q3 sales by segment, Production & Precision Agriculture fell 25% Y/Y to $5.1B, Small Agriculture & Turf slid 18% to $3.05B, and Construction & Forestry dropped 13% to 3.235B.

D.A. Davidson analysts said investors likely were expecting the numbers to come in much worse, and “investors will be looking for hints on fiscal 2025… but it appears as though Deere’s major cut came last quarter and further changes were not required.”

Deere’s (DE) “pricing power was reflected well in Q3 as price helped to dampen impacts from contracting volumes,” CFRA Research analyst Jonathan Sakraida said.

For the full year, Deere (DE) still sees net income at ~$7B, slightly above $6.94B analyst consensus estimate, with net sales in Production & Precision Ag down 20%-25%, Small Ag & Turf down 20%-25%, and Construction & Forestry down 10%-15%.

Deere (DE) said it had laid off workers but did not specify how many, but expects to see ~$150M in layoff costs and $230M in related annual savings.

The job cuts are among steps Deere (DE) is taking to reduce costs and align production with demand as market conditions weaken, CEO John May said on the company’s earnings conference call.

Among Deere’s (DE) peers, CNH Industrial (CNH) +4%, AGCO (AGCO) +3.7%, Cummins (CMI) +3%, United Rentals (URI) +2.8% and Caterpillar (CAT) +2.6%, but Titan Machinery (TITN) -10.1% after reporting preliminary Q2 results well below expectations.