Deere & Co’s Earnings Surprise: Why Investors Aren’t Jumping for Joy
I’ve been keeping a watch on Deere & Company recently. Who makes those giant green tractors? Well, they just posted their third-quarter earnings, and boy, it was a bit of a mixed bag. Let me walk you through it.
The Numbers: A Tale of Two Stories
First off, Deere reported a 42% drop in net profits, landing at $1.73 billion. Now, it may seem like a lot of money (and it is), but when you compare it to last year’s data, it’s not so bright. Earnings per share (EPS) came in at $6.29, which, surprisingly, beat the analyst’s estimate of $5.68. So, on the surface, it looks like Deere did better than expected, right?
But, here’s the kicker. Despite this seemingly good news, their net sales also took a hit, falling by 17% to $13.15 billion. Again, they managed to outpace Wall Street’s expectation of $10.94 billion. So, what’s going on here? It’s like getting a B+ on a test when you were expecting a C—better than you thought, but still not something to celebrate with a victory lap.
Investors’ Cold Feet
Now, you’d think beating expectations would make investors happy, right? Not so fast. The stock did pop up by over 7% right after the news broke, which had some folks cheering. But, and this is a big but, the overall mood among retail investors has been lukewarm, to say the least.
I was scrolling through Stocktwits, and the sentiment meter told an interesting story: it’s sitting at 28/100, down from ‘neutral’ the day before. It’s like going to a party where everyone’s supposed to be excited, but most people are just standing around, sipping their drinks, and looking at their phones. Why? Because beneath the surface, there’s some unease about Deere’s declining financials.
The Why Behind the Worry
So, why the long faces? Well, let’s dive into Deere’s different business segments. Their production and precision agriculture division saw a 25% drop in net sales, down to $5.10 billion. Ouch. And the hits keep coming—operating profit in that segment plunged by 35%. Lower shipment volumes are partly to blame, though they did manage to squeeze out some gains from price hikes.
Small agriculture and turf didn’t fare much better, with an 18% sales drop. And let’s not forget construction and forestry, where sales dipped by 13%. Financial services also suffered a hit, with net income decreasing by 29% due to greater credit loss provisions and less advantageous financing spreads. In plain English, things aren’t looking so hot across the board.
What’s Next for Deere?
Looking ahead, Deere is bracing for more tough times. They’re expecting a 20-25% decline in sales for their agriculture and turf segments for the year, with construction and forestry not far behind at a 10-15% drop. It’s kind of like knowing the weather’s going to be bad for the next few months—there’s not much you can do except hunker down and wait for the storm to pass.
So, despite that little bump in the stock price, the overall sentiment is cautious. Deere might have beaten Wall Street’s expectations this quarter, but with numbers like these, it’s no wonder retail investors aren’t exactly jumping for joy. We’ll have to see how things play out, but for now, it seems like Deere’s got some tough plowing ahead.
