Can DE Weather the Persistent Weakness in Equipment Volumes?

Core Insights - Deere & Company is facing ongoing volume pressures in its equipment operations, with eight consecutive quarters of decline, particularly in the Agricultural & Turf segment [1][10] - Weak farmer sentiment, driven by low commodity prices, high input costs, and elevated interest rates, is negatively impacting demand for agricultural machinery [2] - The company anticipates a challenging industry outlook for fiscal 2025, with significant declines expected in both large and small agricultural equipment markets [3] Equipment Operations - The Agricultural & Turf segment is projected to see a 16.4% decline in volumes, with the Production & Precision AG segment expected to drop 17.6% and the Small AG & Turf segment by 14.2% [5] - The Construction & Forestry segment is also expected to decline by 12.4% in volumes for 2025 [5] - Overall, Equipment Operations' volumes are anticipated to decline by 15.3% in 2025 [5] Market Conditions - The large agriculture equipment market in the U.S. and Canada is expected to decline by 30%, while the small agriculture and turf equipment market is projected to decline by 10-15% [3] - Construction equipment demand is under pressure, with a forecasted 10% drop in U.S. and Canadian construction equipment sales [4] - Trade uncertainty and high interest rates are affecting order activity for both construction and compact construction equipment [4][10] Competitor Analysis - Industry peers such as AGCO Corporation and CNH Industrial are also experiencing declines, with AGCO expecting a 12.1% decline in organic growth for 2025 [6][8] - AGCO anticipates a 25-30% drop in sales volumes of large agricultural equipment in North America [7] - CNH Industrial has reported eight consecutive quarters of volume declines in the Agriculture segment [8] Financial Performance - Deere's shares have gained 24.4% this year, outperforming the industry average of 18.3% [9] - The Zacks Consensus Estimate for Deere's fiscal 2025 earnings indicates a year-over-year decline of 26.5%, with revenues expected to drop by 15% [12] - The earnings estimate for fiscal 2026 indicates a potential recovery with a 17% growth forecast [12]