Deere & Company
CEO : Mr. John C. May II
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2024 Q3 | -17.3% YoY | -66.2% | -38.3% | 2024-11-21 |
Josh Jepsen says,
Overall Financial Performance
- Operating margins for equipment operations in Q4 2024 reached 13.1%, with full-year margins at 18.2%.
- Operating cash flow from equipment operations was just over $6.9 billion, despite lower shipment volumes.
- Net sales and revenues for fiscal year 2024 fell 16% to $51.7 billion, with equipment operations down 19% to $44.8 billion.
- Net income attributable to Deere and Company was $7.1 billion, or $25.62 per diluted share.
Fourth Quarter Highlights
- Q4 net sales and revenues dropped 28% to $11.1 billion, with equipment operations specifically down 33% to $9.3 billion.
- Net income for Q4 declined to $1.2 billion, equating to $4.55 per diluted share.
- Production and precision ag segment saw a 38% reduction in net sales, primarily due to lower shipment volumes.
2025 Market and Segment Outlook
- Global ag and turf equipment demand expected at or below trough levels; US and Canada large ag equipment sales projected to decrease by 30%.
- Production and precision ag segment sales forecasted to drop 15%, with a segment operating margin between 17%-18%.
- Small ag and turf segment expected to see a 10% decline in net sales, with operating margins projected between 13%-14%.
Construction and Forestry Segment Forecast
- Net sales in the construction and forestry segment are estimated to decline by 10%-15% in 2025.
- Operating margin for the segment is expected to be between 11.5%-12.5%.
- US and Canada earthmoving equipment sales expected to fall 10%, while compact construction equipment is forecasted to decline 5%.
Financial Services and Overall Guidance
- Financial services net income forecasted at $750 million for fiscal year 2025, with an improvement over 2024 due to lower provision for credit losses.
- Full-year net income expected in the range of $5 billion to $5.5 billion, with an effective tax rate between 23%-25%.
- Cash flow from equipment operations projected between $4.5 billion to $5.5 billion, showcasing improved structural financial resilience.
Cory Reed says,
Canadian Market Growth
- The Canadian market is experiencing significant competitive conversions following the smart industrial redesign.
- The redesign is tailored to support production specific to crop types and geography in Canada, especially in Western Canada.
- Canada’s primary production system focuses on small grains such as wheat, canola, and barley.
- The operations in these areas are typically large-scale, benefiting from system-level solutions.
Product Innovations and Offerings
- Recent product introductions include X9 combines, high horsepower 9RX tractors, and C series air carts.
- These products are specifically designed to address the challenges faced by Canadian small grains customers.
- The products integrate with John Deere’s technology solutions to enhance operational efficiency, profitability, and quality of life.
Dealer Network Commitment
- The Canadian dealer network is heavily invested in customer satisfaction and maximizing equipment utility.
- Dealers focus on delivering uptime and reliability, which enhances the value proposition for customers.
- This commitment is integral to providing exceptional system-level value in the market.
Impact on Stock Movement
- Increased market conversions and system-level solutions could lead to an uptick in sales and revenues, positively impacting stock performance.
- Continued innovation and tailored product offerings are likely to strengthen competitive positioning in key markets.
- The strong dealer network support ensures sustained customer loyalty and operational continuity, which could bolster long-term financial performance.
Q & A sessions,
Quarterly and Full-Year Financial Performance
- The quarter ended better than expected with significant inventory reductions in North American tractors and combines.
- Year-over-year improvements in production costs, SING, and R&D were noted, driving cash flow outperformance relative to the third-quarter guide.
- Full-year performance was marked by flexibility and adaptability in managing lower demand levels, resulting in favorable production costs.
- Despite muted sales, record levels of R&D spending were maintained to support future product introductions.
- Fiscal year 2024 ended with over $25 in EPS and $5.6 billion returned to shareholders via dividends and share buybacks.
Market Conditions and Projections for 2025
- Farm fundamentals globally are expected to remain depressed, impacting commodity prices and net incomes.
- Dairy and livestock margins remain strong, but machinery demand lags due to interest rates and slow herd expansion.
- Expectations for North American large ag machinery production to align with retail demand in 2025.
- European ag equipment demand faces challenges with further underproduction expected in 2025.
Inventory Management and Production Strategy
- 2024 underproduction was achieved, especially in North American large ag, with a focus on maintaining low inventory levels.
- For sprayers and planters, early order programs saw declines, dictating a production level below mid-cycle for 2025.
- Brazil reached targeted inventory levels in most product lines, allowing production to match retail in 2025, except for combines.
- Used equipment inventory levels are plateauing, with strategies in place to manage reductions effectively.
Technological Advancements and Adoption
- Strong growth in adoption of technologies like ExactApply, reaching an 80% take rate in early order programs.
- Significant growth in global engaged acres, with South America up nearly 30% year-over-year.
- Successful rollout of the See and Spray technology, with over one thousand orders for 2025 installations.
- Transition to a recurring license model for the Precision Ag Essentials Kit resulted in over eight thousand sales.
Outlook and Strategic Focus
- 2025 expected to be marked by discipline and proactive management in the face of challenging market conditions.
- Focus on structural improvements and investments in margin-accretive opportunities to support high margins despite volume declines.
- Continued efforts to reduce costs and enhance customer value through innovative technology solutions.
- Expectations of higher margins relative to previous peaks, despite anticipated sub-80% mid-cycle performance for equipment operations.
No bad stock 