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Deere recently reported its Q2 fiscal 2024 results, with revenues and earnings exceeding street estimates. The company reported equipment revenue of $13.6 billion and earnings of $8.53 per share, compared to consensus estimates of $13.3 billion and $7.86, respectively. However, the company provided a bleak outlook, with net income now expected to be around $7 billion, compared to its prior outlook of $7.5 billion – $7.75 billion. This led to a 5% drop in its stock price on Thursday, May 16.

DE stock has seen strong gains of 45% over the past three years, outperforming the S&P 500 in that period. However, the stock has experienced fluctuations in performance, with underperformance in 2023. Given the uncertain macroeconomic environment with high oil prices and elevated interest rates, questions arise about whether DE could face a similar situation and underperform the S&P in the next 12 months. From a valuation perspective, DE stock appears to be appropriately priced at $382 per share, close to its current market price of $395.

In Q2, Deere’s revenue of $13.6 billion was down 15% year-over-year, with declines seen across various segments. Despite benefiting from a robust pricing environment, equipment volume declined, leading to a 17% fall in profit from the prior year quarter. Looking ahead, the company expects a decline in sales for all its manufacturing segments in 2024, as it enters mid-cycle levels after hitting a cyclical peak last year. Factors such as falling commodity prices and elevated interest rates may present challenges for Deere in the near term.

While DE stock appears to be fully valued, it is important to assess how Deere’s peers are performing on key metrics. Understanding how other companies in the industry are faring can provide valuable insights for investors. Deere’s business is cyclical, and with sales volume expected to decline, the company may face challenges in the coming months. Despite these headwinds, Deere continues to navigate the changing macroeconomic environment and work towards sustainable growth and profitability.

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