Deere and Co. reported higher net earnings Wednesday for the latest quarter despite lower sales in its production and precision ag business.
Deere cautioned that its net sales in production and precision ag are likely to fall by 15% to 20% for fiscal 2024 due in part to the impact of higher interest rates on farmer purchasing. Deere expects its operating margin on production and precision ag to decline from 26.1% for fiscal 2023 to 23% to 24% for FY24.
Deere reported net income of $2.37 billion, or $8.26 per share, for the fourth quarter of fiscal 2023, which ended Oct. 29, down from $2.25 billion, or $7.44 per share, for the fourth quarter of FY22.
Net sales of production and precision ag equipment declined 6% to just under $7 billion for the fourth quarter, but the segment’s operating profit rose 6% to $1.84 billion.
Company-wide earnings for the full fiscal year totaled $10.2 billion, up from $7.1 billion for FY22. The operating profit in FY23 for production and precision ag rose 60% to nearly $7 billion for the fiscal year, up from $4.4 billion in FY22.
Deere is forecasting company-wide earnings for FY24 of $7.75 billion to $8.25 billion.
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Brent Norwood, Deere’s director of investor relations, told analysts the fundamentals of the farm economy “are expected to remain sound in 2024,” but will be “down from the record highs of the last few years.”
Norwood described farm equipment demand as “mid-cycle,” or a period of moderate growth.
“After three years of healthy fleet replacement levels, customers will have a little more discretion on equipment” expenditures, “creating a more dynamic volume environment for the next year,” he said.
The broader industry outlook is for large ag equipment sales to be down about 10% to 15% in the United States and Canada for FY24, Deere said.
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