Deere & Company (NYSE: DE) has its sights set on greener pastures. The company, to investors’ chagrin, has decided to move production to Mexico. The world's largest seller of crop harvesters and tractors has announced significant job cuts, causing a shareholder sell-off and a 2% drop in stock price. This is also bad news for its employees: approximately 610 jobs will be eliminated across three plants in Illinois and Iowa. These layoffs are scheduled for August 30.
Deere cites lack of demand as the reason for the job cuts, despite reporting more than $10 billion in profits for 2023. There are questions as to why affected employees weren't offered positions at the company’s more successful plants. Some workers attribute the decision to corporate greed rather than necessity. The decision to move production to Mexico has raised concerns about the company's commitment to its American workforce.
Recent History
DE shares slid more than 5% after the company’s Q1 2024 report. Although it exceeded sales and profit estimates, revenue was down 8% from the prior year’s quarter. Deere also lowered its guidance for the full year, citing fewer purchases from farmers.
The company explained that its construction market made up for the decline in turf and agricultural demand. They anticipate that fiscal year 2024 income will be about $7.0 billion. Why the move? They say it’s to address the higher manufacturing cost and reduced demand for the products being made at the facilities that are closing.
Zooming Out
Economic analysts project that net farm income will decline by 25% due to higher interest rates, lower crop prices, and higher labor costs. This is believed to lead to reduced demand for John Deere’s products, backing up what the company reports. As of now, analysts are fairly upbeat about the company’s prospects. They have a Moderate Buy rating for DE shares, with 10 Buys and 7 Holds. Although the stock has lost 8.78% in value over the last year, the average 12-month price target of $423.81 suggests an upside potential of more than 16%.
Neither Julie Stoller nor Stocks.News has positions in this company.
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Contributing Writer
As a professional writer since 2012, Julie Stoller has covered many industries, from healthcare and technology to consumer products and industrials. She has written about IPOs, spinoffs, ETFs, stock splits, commodities, legislative actions impacting investors, and macroeconomic issues. While keeping up with the latest meme stocks and trends, Julie's special interests are discovering ...