Deere & Company (DE) has issued a safety recall for approximately 147,900 compact utility tractors in the United States due to a potential brake failure risk. The voluntary recall, aimed at ensuring customer safety, covers specific models: 1023E, 1025R, and 2025R, sold between November 2017 and July 2024. In Canada, the company has recalled an additional 16,800 of the same models.
The U.S. Consumer Product Safety Commission (CPSC) has identified a potential safety hazard in the recalled tractors. The front bell crank in the brake linkage may break, leading to brake failure and increasing the risk of accidents. To date, there have been four reports of brake linkage failure in the United States, resulting in one hospitalization, two impact injuries, and minor damage to the tractors.
Deere is taking a proactive approach to addressing this safety issue. The company is working closely with the U.S. CPSC and has instructed impacted customers to cease operating their tractors until they receive a free repair from an authorized Deere dealer. With over 2,000 dealerships across the United States and Canada, customers have easy access to repair services. For customers who are unable to transport their tractors to a dealer, Deere will arrange for repairs to be completed at their home.
Deere also reported its third-quarter fiscal 2024 earnings, revealing a 38% decline in net income compared to the previous year. This decline was attributed to lower shipment volumes across all segments, reflecting weak demand. Despite the decrease, the company’s pricing strategies and cost-saving measures partially offset the impact. Net sales of equipment operations (comprising Agriculture, and Turf, Construction, and Forestry) reached $11.39 billion, a 19.9% year-over-year decrease, but exceeding the Zacks Consensus Estimate of $10.87 billion. Total net sales, including financial services and other operations, amounted to $13.15 billion, representing a 16.8% year-over-year decline.
Looking ahead, Deere anticipates a challenging environment in the global agricultural and construction sectors. To align production with demand and manage costs, the company has adjusted its strategies. For fiscal 2024, Deere maintains its net income guidance at $7 billion, suggesting a 31% decrease compared to the $10.2 billion reported in fiscal 2023. Net sales for Production & Precision Agriculture are expected to decline by 20-25% year over year in fiscal 2024. Sales of Small Agriculture & Turf are projected to dip by 20-25%. Deere anticipates a 10-15% decline in Construction & Forestry sales. The Financial Services segment is expected to generate a net income of $720 million.
Despite the challenges, DE shares have outperformed the industry, gaining 8.7% in the past year compared to the industry’s 4% growth. Deere currently holds a Zacks Rank #3 (Hold), indicating a neutral outlook.
Investors seeking alternative investment opportunities in the Industrial Products sector may consider Crane Company (CR), Flowserve Corporation (FLS), and RBC Bearings Incorporated (RBC), each carrying a Zacks Rank #2 (Buy). Crane Company has a Zacks Consensus Estimate for 2024 earnings of $5.07 per share, representing a 6% upward revision in the past 60 days. The company boasts a trailing four-quarter average earnings surprise of 11.2%, and its shares have risen by 75.2% in a year. Flowserve Corporation exhibits an average trailing four-quarter earnings surprise of 18.2%. The Zacks Consensus Estimate for FLS’ 2024 earnings is $2.76 per share, implying a 31.6% year-over-year increase. The consensus estimate for 2024 earnings has moved north by 4% in the past 60 days, and the company’s shares have gained 27.5% in a year. RBC Bearings Incorporated has a Zacks Consensus Estimate for fiscal 2025 earnings of $9.71 per share, with a 1.4% upward revision in the past 60 days. The company maintains a trailing four-quarter average earnings surprise of 4.7%, and its shares have gained 27.2% in a year.
