10-QPeriod: Q2 FY2023

DEERE & CO Quarterly Report for Q2 Ended Apr 30, 2023

Filed June 1, 2023For Securities:DE

Summary

Deere & Company (DE) reported a strong second quarter of fiscal year 2023, driven by significant increases in net sales and revenues across its core segments. Net sales and revenues rose by 30% year-over-year to $17.4 billion, reflecting higher shipment volumes and effective price realization, particularly in Production & Precision Ag and Construction & Forestry. Net income attributable to Deere & Company saw a substantial jump of 36% to $2.86 billion, leading to diluted earnings per share of $9.65, up from $6.81 in the prior year's comparable period. This performance underscores robust demand for agricultural and construction equipment, supported by full order books extending into 2024 and improving supply chain conditions. The company's financial services segment also contributed positively, though net income was impacted by less favorable financing spreads and a one-time correction for financing incentives. Despite these factors, the overall financial health remains strong, with solid cash flow generation and a healthy balance sheet. Deere continues to invest in its Smart Industrial strategy, focusing on technology and automation to enhance customer value and sustainability.

Financial Highlights

43 data points
Beta

Revenue

$17.39B

Net Income

$2.86B

16.4% Net Margin

EPS (Diluted)

$9.65

Total Assets

$98.35B

Cash & Equivalents

$5.27B

Free Cash Flow

$830.00M

Financial Statements
Beta
Revenue$17.39B
R&D Expenses$547.00M
SG&A Expenses$1.33B
Operating Expenses$13.54B
Operating Income$3.90B
Interest Expense$569.00M
Net Income$2.86B
EPS (Basic)$9.69
EPS (Diluted)$9.65
Shares Outstanding (Basic)295.10M
Shares Outstanding (Diluted)296.50M

Key Highlights

  • 1Net sales and revenues increased by 30% to $17.4 billion for the quarter, driven by higher shipment volumes and price realization across key segments.
  • 2Net income attributable to Deere & Company surged by 36% to $2.86 billion, resulting in diluted EPS of $9.65.
  • 3Production & Precision Agriculture segment sales grew by 53% and Construction & Forestry by 23%, showcasing strong market demand and effective execution.
  • 4Operating profit across equipment operations saw significant improvements, with Production & Precision Ag up 105% and Small Ag & Turf up 63%.
  • 5Cash flows from financing activities provided $2.02 billion, supporting working capital needs and share repurchases.
  • 6The company is experiencing improved supply chain conditions, allowing for higher production levels, though remaining constraints may limit future increases.
  • 7Deere reiterates its commitment to its Smart Industrial operating model and Leap Ambitions, emphasizing investments in technology and automation.

Frequently Asked Questions

The substantial increase in net sales and revenues, up 30% year-over-year, was primarily driven by higher shipment volumes across Deere's key segments, particularly Production & Precision Agriculture and Construction & Forestry. Effective price realization also played a significant role in boosting top-line performance.

Profitability saw a strong improvement. Net income attributable to Deere & Company increased by 36% to $2.86 billion, and diluted earnings per share rose to $9.65 from $6.81 in the same period last year. This was supported by higher sales volumes, price realization, and operational efficiencies, although offset by increased production costs and R&D investments.

Deere anticipates continued strong demand, with order books full and extending into 2024. While supply chain conditions have improved significantly in the second quarter of 2023, some remaining constraints are expected to limit production levels. The company is transitioning back to more historical seasonal production patterns.

The Financial Services segment reported higher revenues due to increased average financing rates and higher average portfolio balances. However, net income for the segment decreased due to less favorable financing spreads, a higher provision for credit losses, and a one-time correction related to accounting for dealer financing incentives. Despite this, the credit quality of the portfolio remains strong.