10-QPeriod: Q1 FY2023

DEERE & CO Quarterly Report for Q1 Ended Jan 29, 2023

Filed February 23, 2023For Securities:DE

Summary

Deere & Company reported a robust first quarter for fiscal year 2023, demonstrating significant top-line growth and enhanced profitability compared to the prior year. Net sales and revenues surged by 32% year-over-year, driven by strong performance across all segments, particularly Production & Precision Agriculture, which saw a 55% increase in net sales. This growth was fueled by higher shipment volumes and effective price realization, indicating strong demand and the company's ability to navigate inflationary pressures. Profitability also saw a substantial improvement, with net income attributable to Deere & Company more than doubling. This was achieved despite increased research and development and selling, administrative, and general expenses, reflecting operational efficiencies and pricing power. The company's financial services segment experienced a slight decrease in net income due to less favorable financing spreads amid rising interest rates, but overall, Deere & Company presented a strong financial picture, underscoring its resilient business model and strategic execution in a dynamic market environment.

Financial Statements
Beta
Revenue$12.65B
R&D Expenses$495.00M
SG&A Expenses$952.00M
Operating Expenses$10.16B
Operating Income$2.52B
Interest Expense$479.00M
Net Income$1.96B
EPS (Basic)$6.58
EPS (Diluted)$6.55
Shares Outstanding (Basic)297.60M
Shares Outstanding (Diluted)299.10M

Key Highlights

  • 1Net sales and revenues increased by a significant 32% to $12,652 million, up from $9,569 million in the prior year's quarter.
  • 2Net income attributable to Deere & Company more than doubled, reaching $1,959 million ($6.55 per diluted share), compared to $903 million ($2.92 per diluted share) in the same period last year.
  • 3The Production & Precision Agriculture segment was a standout performer, with net sales jumping 55% to $5,198 million and operating profit soaring 308% to $1,208 million.
  • 4Construction and Forestry segment also showed strong growth, with net sales up 26% to $3,203 million and operating profit up 130% to $625 million.
  • 5Despite a challenging interest rate environment, the Financial Services segment's revenue increased 36% to $1,244 million, though net income decreased by 20% to $185 million due to compressed financing spreads.
  • 6Inventories increased by $1,561 million in the quarter, reflecting a seasonal buildup and ongoing supply chain disruptions, with total inventories reaching $10,056 million.
  • 7The company's strong financial position is supported by healthy cash flow from investing activities ($760 million) and strategic management of borrowings.

Frequently Asked Questions

Deere & Company's revenue growth was primarily driven by strong demand across all its operating segments, leading to higher shipment volumes and effective price realization. The Production & Precision Agriculture segment, in particular, experienced substantial growth.

The rising interest rate environment led to less favorable financing spreads for the Financial Services segment, impacting its net income. This was partially offset by higher average portfolio balances and increased revenue due to higher average financing rates.

Inventories increased during the quarter, reaching $10,056 million. This increase is attributed to a seasonal buildup, ongoing supply chain disruptions, and higher forecasted shipment volumes. The company is working to manage these levels while addressing supply chain challenges.

The company anticipates continued strong demand for large agricultural machinery in North America, Europe, and South America. Demand for small agricultural equipment is stable, while construction equipment markets are expected to be steady. Industry sales for large agricultural machinery in the U.S. and Canada are forecasted to increase, while small agricultural and turf equipment in the U.S. and Canada are expected to decrease slightly.