Replies to post #29531 on The Rising Influence of Rising Affluence

[DewDiligence]

Trump threatens DE with_steep tariff on_equipment_imported_from Mexico:

https://finance.yahoo.com/news/trump-vows-call-xi-elected-194518506.html

Deere earlier this year said it would lay off 503 workers in Illinois and 310 in Iowa as it faces rising operational costs and declining demand. It’s also acquiring land in Mexico to shift some production previously done in the US.

…“I’m just notifying John Deere right now, if you do that, we’re putting a 200% tariff on everything that you want to sell into the United States,” Trump said Monday, citing reports about the company shifting manufacturing to Mexico.

DE was -1.5% in AH trading.

[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.