As reported earlier by Bloomberg, and others, John Deere has slashed its annual profit projections. This has caused a recess in its trading price – which has been in a slow decline, with the occasional bump over the last year. In fact, If someone took a snapshot of the company stock price in over just the last year, you may think it is almost stagnating.
This is a surprising twist if you consider how the company stock price has more than doubled since 2020. John Deere has always been a growing and committed company, but 2020 allowed it to skyrocket into realms it had never seen on the market, with share prices of over $350 in 2024, rising from a stable growing average of about $158 in the same month for 2019.
Over the course of 2020, Deere played some big cards in publicity to generate that massive public interest. They rolled out a precision Ag line that utilized advanced AI machine learning, they introduced a commitment to “green” energy planning, and even committed to bring back certain manufacturing to the US so to invest more at home. Some people may say that when things got tough, Deere got going.
Deere made such big waves in 2020, that even Silicon Valley couldn’t ignore it. And Deere boasts investors such as Bill Gates and even Elon Musk. It may not be the Deere you remember from your childhood, but it is an evolving company that has never shied away from being on the vanguard of change and technology – since the days of its foundation even, and the plow John Deere himself invented.
Deere normally even beats its own earnings and sales projections, so what is going on?
Lowering crop prices, restricted spending, and less demand for equipment is what seems to be the answer – as well a basic bear market in the Mid-West grain market, which is the “bread and butter” for Deere. Farm income overall is set to drop, and in major sectors in both the nation and states, crops are the lowest they have ever been in the last 10 years, but the cost of inputs are almost the most they have ever been in certain cases.
This doesn’t even begin to cover the European Ag issues, that have likely taken its toll on Deere as well – where the company reported itself that those will likely further decline forecasting by another 10 – 15% in those sectors alone. The US decline has already been predicted to be within that range – but the US Ad sector has not been up in rally like the European sector.
Another issue is that Deere has seemed to offset its reduced volume with raising prices, but that is not sustainable in the growth that we are seeing on Wall Street. That is not sustainable in any business over time, unless you have some sort of unlimited pool, or your pricing becomes insanely excessive. It is a bad combination. According to the latest report, Deere does seem to be worried about this, but it is counting on its AI sector, as well as autonomous tractors overall regardless.
The 2024 Deere earning projections do not look optimistic, and they are a market leader as well as an indicator of the economy in part. Though Deere is a strong company, and there are still many bullish investors for it, it may be time for some caution – which is what the market seems to be doing already.
When you hear bull investors say things like, “it’s been so amazing over the last few years, and it is just going to get better,” then maybe it is time to do your homework and see what is really going on.
What are your thoughts?
