Despite the fact that John Deere, the world's largest agricultural equipment manufacturer, reports solid third quarter results, investors have less confidence in the American company from Moline (Illinois). In the current year, farmers worldwide have invested heavily in new machines, but the trees do not reach the sky.
In the third quarter, Deere & Co. a net turnover of $2,978 billion, equivalent to €2,74 billion. That is an increase of 58% compared to the same quarter last year. The financial result for the nine months of the fiscal year is also significantly higher than in the previous period: $7,797 billion versus $4,885 billion.
Higher profit expectations
At the beginning of this year, the green-and-yellow manufacturer was already in great shape to speak about the expectations for 2022-2023. Sales of tractors, combine harvesters, forage harvesters and more are up a fifth to a quarter this year compared to the year before. Many farmers worldwide have achieved better financial results, mainly through the sale of arable products, and partly invested in new mechanization. The turnover expectation of a maximum of $9,25 billion has now been adjusted to a maximum of $10 billion.
While shareholders received the news with cheers at the beginning of this year, which resulted in a share price spike, the opposite is now seen. They are less positive, especially about the longer term. The reason for this is a significant drop in commodity prices worldwide. In the United States (US), Russia and Brazil, there is much less investment and this can affect the manufacturer. In the US, corn, soy and wheat prices are at their lowest levels in three years.
Share drops 9,5%
Deere & Co shares fell from $431,68 to $393,96 on Friday, before recovering slightly on Monday afternoon Dutch time. That is the lowest price since June 12. Compared to the longer term, the share continues to operate at a significantly higher value. Since the corona pandemic and war in Ukraine, the value has skyrocketed.
A similar movement can be seen in the share price of its largest competitor, CNH Industrial. Since the end of July, the value there has decreased by 14,5%. At Agco, number three in the world, this is 14%. Investors and analysts believe that the agricultural boom that the global agricultural sector has been experiencing in recent years is rapidly declining and returning to the old normal.