CORRECTED-UPDATE 2-Deere cuts 2024 profit view as borrowing costs hurt farm equipment demand
(Corrects paragraph 8 to show quarter ended Jan 28 not in December)
By Bianca Flowers and Shivansh Tiwary
Feb 15 (Reuters) - Deere & Co cut its 2024 profit forecast on Thursday as farmers remained hesitant about big-ticket equipment purchases due to high borrowing rates and falling crop prices, even as its first-quarter sales and profits topped Wall Street estimates.
Shares of the world's largest farm equipment maker were down 3.3% in premarket trading.
With farmers reassessing expenses, particularly for compact tractors, Deere said it now expects net income for fiscal 2024 in the range of $7.50 billion to $7.75 billion. This is below its prior forecast of $7.75 billion to $8.25 billion.
Net farm income in the U.S. is set to fall 27% this year to $116 billion, from its inflation-adjusted total in 2023, according to data from the U.S. Department of Agriculture.
Deere, a barometer of the global economy, has maintained resilient operating profit margins despite depressed crop prices. Demand for new equipment and parts to repair aging machinery bolstered sales in previous quarters, but executives have expressed caution about margin performance amid a weakening farm economy, and said it intends to cut equipment production in 2024.
The company's precision agriculture division's retail sales had outpaced other segments in previous quarters but are beginning to slow, declining 7% year-over-year in the fiscal first quarter.
Over the past two years, Deere raised prices across its equipment lines to counter higher material and logistics costs.
Net income fell to $1.75 billion, or $6.23 per share, for the quarter through Jan 28, beating analysts estimates of $5.21 per share, according to LSEG data.
Revenue for equipment operations came in at $10.5 billion, topping consensus forecasts of $10.3 billion. (Reporting by Shivansh Tiwary in Bengaluru; Editing by Shounak Dasgupta, Arun Koyyurand Nick Zieminski)
