The Rising Influence of Rising Affluence

[DewDiligence]

DE issues soft FY2025* guidance—>share price rockets 9%:

https://www.deere.com/assets/pdfs/common/news/deere-4q24-earnings-release.pdf

Background: FY2023* was a peak-cycle year in the agriculture-equipment market (which comprises ~70% of DE’s profits), and hence FY2024* was a down year. DE expects FY2025* to be another down year; on today’s CC, DE described the outlook for FY2025 as “80% of mid-cycle.”

Details: FY2025 net income is expected to be $5.0-5.5B, down from $7.1B in FY2024 and $10.2B in FY2023. Based on an estimated 260M diluted shares, the FY2025 net-income guidance equates to FY2025 GAAP EPS of $19.23-21.15, down from $25.62 in FY2024 and $34.63 in FY2023.

At the current share price (~$440 as I’m typing), the guidance for FY2025 EPS represents a forward P/E of 21-23x.

Based on all of the above, the share price today is +9% to within a hair of its all-time high of $450 in 2023. Why does this make sense? Because DE is a rather different company than it was only a few years. It is now more of a tech company—with material recurring service revenues—than the “boring” cyclical industrial it used to be.


FY4Q24 CC slides:
https://s22.q4cdn.com/253594569/files/doc_financials/2024/q4/DE-4Q24-Earnings-Call-Presentation.pdf

*DE’s fiscal years end on the last Sunday in October. FY4Q24 ran from 7/31/24 to 10/27/24, essentially the Aug/Sep/Oct period.