Deere Sees Farm Economy Turning Around, Despite Tariff Headwinds
World agricultural machinery leader Deere & Co. reports signs of recovery in the farm economy, but potential tariffs pose a threat to the nascent upturn.
Improving Fundamentals
The Illinois-based company observes easing inventories of used machinery and rising corn prices, indicating a potential increase in farmer spending. According to the US Department of Agriculture, American farm income is projected to rise for the first time in three years by 2025.
CEO Optimism
CEO John May emphasizes Deere's focus on inventory optimization. "Our efforts are positioning the company to successfully navigate the current environment," he states.
Share Performance
Deere's shares experienced a 1.7% decline in New York trading, despite an earlier drop of 5.3%.
Tariff Uncertainties
The company maintains its 2025 net income estimate of $5-5.5 billion, while anticipating a 30% decline in North American sales for the year. The impact of potential tariffs remains unquantified.
Used Equipment Challenge
Farm-machinery platform Tractor Zoom reports a significant increase in used Deere tractors and a decline in new sales. The adjustment to the slower farm economy is expected to take time.
Bright Spots
Despite a 50% year-over-year decline, Deere's first-quarter net income of $869 million exceeded estimates. The company highlights increased sales of Starlink connectivity kits for tractors and the introduction of driverless equipment.