Agriculture equipment maker Deere & Co. (DE 3.50%) fell short of expectations in the most recent quarter and issued a subdued forecast for the quarter ahead.
Investors were disappointed, sending Deere shares down more than 5% at the open on Thursday and down 3% as of 11:45 a.m. ET.
A tough operating environment
Deere is one of the world's largest manufacturers of agriculture and outdoor equipment. Its machines are second to none, but this is a business tied to a notoriously cyclical industry.
The company earned $3.19 per share in its fiscal first quarter, ending Jan. 26, on revenue of $8.51 billion, missing the consensus earnings estimate by $0.06 per share but beating on revenue by $620 million. That sales number was down 30% year over year, a reflection of tepid demand among farmers.
CEO John C. May said: "Deere's performance in the first quarter highlights our continued focus on optimizing inventory levels of both new and used equipment amid the uncertain market conditions our customers are facing. We're seeing compelling evidence that our efforts are positioning the company to successfully navigate the current environment."
NYSE: DE
Key Data Points
Is Deere stock a buy?
The company is a best-in-class manufacturer, but it is hard to see things improving overnight. Management forecast full-year precision agriculture sales to be down another 15% to 20% in fiscal 2025, forestry sales down 10% to 15%, and small equipment and turf sales down by 10%.
Deere's heavy equipment is expensive, and farmers tend to buy primarily when crop prices are high and they feel good that conditions will remain favorable. With all the talk of tariffs and uncertain global demand, it is a difficult market to be selling into. For long-term holders, Deere can be a winner. But patience will be required for now.
