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Deere & Company DE is scheduled to report second-quarter fiscal 2025 results on May 15, before the opening bell. While the company is seeing strong demand from product launches, elevated production expenses and low commodity prices are anticipated to have marred the gains.
Factors Likely to Have Shaped DE’s Q2 Performance
Low Commodity Prices & Shipment Volumes: Deere has been facing challenges due to weak farmer spending amid low commodity prices. In the wake of challenging conditions in the global agricultural and construction sectors, DE has been aligning its production with demand levels. The company has, thus, been reporting lower shipment volumes in the past few quarters and this is likely to have weighed on the company’s fiscal second-quarter performance as well.
Higher Expenses: High production expenses; selling, administrative and general expenses; and research and development expenses are likely to have impacted the company’s margin in the quarter.
Favorable Pricing: Deere is assessing its cost structure by reviewing organizational efficiency and footprint assessment, which, in turn, will help improve margins. Its price realization action is expected to offset higher material and freight costs. Favorable price realization is expected to have negated some of these headwinds, as seen in the previous quarters.
Projections for Deere’s Segments in Q2
Our model predicts the Production & Precision Agriculture segment’s revenues to be $4.61 billion for the fiscal second quarter, suggesting a year-over-year decrease of 23.9%. We expect the segment’s operating profit to be $619 million, indicating a 62.5% fall from the prior-year quarter’s reported figure. Gains from price realization are likely to have been offset by escalated production expenses and lower shipment volumes.
Our estimate for the Small Agriculture & Turf segment’s revenues is pegged at $2.78 billion for the fiscal second quarter, indicating a 12.6% decline from the prior-year quarter’s actual. The segment’s operating profit is estimated at $485 million, suggesting a 15.1% year-over-year fall. The Small Agriculture & Turf segment’s performance is expected to have been affected by elevated production expenses; higher research and development, and selling, general and administrative expenses; and lower shipment volumes, partially offset by price realization.
The Construction & Forestry segment’s sales are estimated to be $3.29 billion for the fiscal second quarter, suggesting a 14.4% dip from the prior-year quarter’s reported number on lower volume. We predict the segment’s operating profit to plunge 12% year over year to $588 million.
Our estimate for the Financial Services segment’s revenues is pegged at $1.48 billion for the fiscal second quarter, indicating a 6.7% rise from the year-ago quarter’s actual. Our projection for the segment’s operating profit is $232 million. The segment reported operating profit of $209 million in the prior-year quarter.