Deere cuts 2024 profit view as borrowing costs hurt farm equipment demand
By Bianca Flowers and Shivansh Tiwary
(Reuters) -Deere & Co cut its 2024 profit forecast on Thursday as farmers remained hesitant about big-ticket equipment purchases due to high borrowing rates and falling crop prices, even as its first-quarter sales and profit topped Wall Street estimates.
Shares of the world's largest farm equipment maker were down 2.6% in premarket trading.
With farmers reassessing expenses, particularly for compact tractors, Deere (NYSE:DE) said it now expects net income for fiscal 2024 of $7.50 billion to $7.75 billion. This is below its prior forecast of $7.75 billion to $8.25 billion and below analysts predictions of $7.93 billion, which already marked a decline from the prior quarter.
«That's not particularly unusual for the first year of a market correction,» said Stephen Volkmann, senior machinery analyst at Jefferies. «The lower guidance that they put out is just a factor of that lower large agriculture outlook.»
Deere, a barometer of the global economy, said operating margins contracted due to lower sales for large agriculture equipment which the company is expecting to decline 20% this year. Operating profit across its equipment divisions fell 13% in aggregate.
Executives have expressed caution about margin performance amid a weakening farm economy, and said Deere intends to cut equipment production in 2024. Rival CNH Industrial (NYSE:CNHI) has also tempered investor expectations even after posting better than expected profit for the fourth-quarter, saying softening commodity prices will lead to a downturn in farm equipment demand.
Net farm income in the U.S. is set to fall 27% this year to $116 billion, from its inflation-adjusted total in 2023, according to the U.S. Department of
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