Deere’s quarterly revenue slumped 35% and missed analysts’ expectations last month. This was expected as early as the beginning of last year, as the trend continues for more and more farmers retaining older equipment or switching to rentals. This and other economic factors are to blame for weaker incomes and higher borrowing costs for farmers and dealerships alike.
It is no secret that Deere investors themselves have expressed concerned, and the company has tried to address those concerns, especially new concerns about the possible fallout from President Donald Trump’s tariff plans.
Tariffs on Canada, Mexico and China have created more uncertainty regarding the impact on U.S. farmers, most especially in the soybean, corn, wheat, and meat markets – which are possibly the more vulnerable Ag markets when it comes to tariffs.
“Our primary focus remains on understanding how proposed tariffs may impact our customers’ operations as we recognize their need for free and fair trade and commodities,” says Deere’s finance chief Joshua Jepsen in his lates call with analysts.
Despite this, Deere’s stock price has been on a steady increase over the last 12 month, having seen some major fluctuations over the last 4 years, when economic concerns seemed to be at their most palpable. However, time will tell, and we may see another dip into the summer.
Prices of industrial metals, crucial for manufacturing equipment, continue rising, possibly driven further by tariffs on steel and aluminum and domestic production trying to keep up.
“In terms of components or component sourcing, about 10% of our U.S. manufacturing cost of goods sold come from Mexico with less than 2% coming from China and approximately 1% from Canada,” Jepsen said.
Deere said its forecast did not account for any potential impact from tariffs, citing the rapidly evolving nature of the policies currently.
The company stands by its 2025 profit forecast of approximately $5.5 billion, which many have labeled conservative, anticipating more potential upward revisions as the year progresses.
“Even if the trade war abates at some point, farmers will likely navigate uncertainty with a great deal of caution around capex decisions,” CFRA analyst Jonathan Sakraida said.
The company now expects sales in its largest production and precision agriculture segment, which includes larger tractors and combines, to fall between 15% and 20%, compared to its previous forecast of a 15% decline.
First-quarter net sales decreased 35% to $6.81 billion, compared with analysts’ estimates of $7.7 billion, according to data compiled by LSEG.
Deere reported a profit of $3.19 per share, compared with Wall Street expectations of $3.11, helped by a drop in production costs.
