The Rising Influence of Rising Affluence

[DewDiligence]

DE reports FY1Q25* results—maintains FY2025 EPS guidance with a proviso:

https://investor.deere.com/files/doc_financials/2025/q1/DE-1Q25-News-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, closer to mid-cycle than to the peak for the ag business.

Details: FY2025 net income is expected to be $5.0-5.5B, down from $7.1B in FY2024 and $10.2B in FY2023. However, DE’s FY2025 guidance does not take into account any impact from tariffs.

Based on an estimated 270M diluted shares, the FY2025 net-income guidance equates to FY2025 GAAP EPS of $18.52-20.37. At the current share price (~$460 as I’m typing), the guidance represents a forward P/E of 22-25x.

Based on all of the above, the share price is down about 3% today. The stock was recently trading at an all-time high, but uncertainty about macroeconomic trends tariffs appear to be driving today’s selloff. DE is major buyer of steel, and the new 25% tariff on imported steel will raise the price of both imported and domestic steel in the US market. Moreover, retaliatory tariffs by other countries against US agricultural exports could put a dent in US farmers’ ability to pay for new and upgraded machinery.


FY1Q25 CC slides:
https://s22.q4cdn.com/253594569/files/doc_financials/2025/q1/DE-1Q25-Earnings-Call-Presentation_Final.pdf

*DE’s fiscal years end on the last Sunday in October. FY1Q25 ran from 10/28/24 to 1/28/25, essentially the Nov/Dec/Jan period.