Deere Earnings: Management Guides to a Weaker Fiscal 2024 Due to Softening Ag Fundamentals

The key takeaway from earnings was management’s weaker 2024 guidance. The company called out moderating commodity prices and higher interest rates as key drivers to weakening ag fundamentals. That said, management continues to point to the replacement cycle as a near-term driver. However, this isn’t enough to drive sales and margin growth in 2024. As a result, we’ve lowered our 2024 sales and margin estimates. We now expect equipment sales to decline by 12%, while operating margins decrease over 300 basis points to 19.7%. These changes led to a 5% decrease in our fair value estimate, which now sits at $360 per share (from $379 previously).