10-QPeriod: Q3 FY2023

DEERE & CO Quarterly Report for Q3 Ended Jul 30, 2023

Filed August 31, 2023For Securities:DE

Summary

Deere & Company (DE) reported strong financial results for the third quarter and nine months ended July 30, 2023, demonstrating robust growth across its key segments. Net sales and revenues increased by 12% for the quarter and 24% year-to-date, driven by significant price realization and improved shipment volumes, particularly in Production and Precision Agriculture and Construction & Forestry. Profitability saw substantial gains, with net income attributable to Deere & Company growing by 58% for the quarter and 60% year-to-date. This impressive performance was supported by a favorable cost of sales ratio and strategic pricing initiatives. The company's financial services segment also contributed positively, albeit with some pressure on financing spreads due to rising interest rates. Deere & Company's outlook remains positive, supported by strong demand, improving supply chains, and strategic investments in technology.

Financial Highlights

43 data points
Beta

Revenue

$15.80B

Net Income

$2.98B

18.8% Net Margin

EPS (Diluted)

$10.20

Total Assets

$103.40B

Cash & Equivalents

$6.58B

Free Cash Flow

$2.74B

Financial Statements
Beta
Revenue$15.80B
R&D Expenses$528.00M
SG&A Expenses$1.11B
Operating Expenses$12.20B
Operating Income$3.52B
Interest Expense$623.00M
Net Income$2.98B
EPS (Basic)$10.24
EPS (Diluted)$10.20
Shares Outstanding (Basic)290.80M
Shares Outstanding (Diluted)292.10M

Key Highlights

  • 1Net sales and revenues increased by 12% to $15.8 billion for the third quarter and 24% to $45.8 billion for the nine months ended July 30, 2023, primarily driven by price realization.
  • 2Net income attributable to Deere & Company surged by 58% to $2.98 billion for the third quarter and 60% to $7.80 billion for the nine months.
  • 3Operating profit for the Production & Precision Ag segment increased by 38% for the quarter and 95% year-to-date, reflecting strong pricing and volume.
  • 4The Construction & Forestry segment also showed robust growth with a 14% increase in net sales and a 39% increase in operating profit for the quarter.
  • 5Despite rising interest rates impacting financing spreads, the Financial Services segment revenue increased by 47% for the quarter due to higher average portfolio balances and financing rates.
  • 6The company reported significant improvements in its cost of sales to net sales ratio, moving from 73.2% in Q3 2022 to 67.4% in Q3 2023.
  • 7Deere & Company repurchased approximately $5.4 billion of its common stock during the third quarter, underscoring its commitment to returning capital to shareholders.

Frequently Asked Questions

The substantial increase in net income for the third quarter and nine months ended July 30, 2023, was driven by a combination of strong price realization across all major segments, improved shipment volumes, and a more favorable cost of sales ratio. Additionally, a favorable tax ruling in Brazil contributed to a reduction in the provision for income taxes for the nine-month period.

The Financial Services segment experienced a revenue increase of 47% for the quarter, primarily due to a higher average portfolio balance and increased financing rates. However, net income for this segment was negatively impacted by less favorable financing spreads, a correction of accounting for financing incentives, and a higher provision for credit losses. The company is actively managing these pressures through its funding mix and interest rate hedging strategies.

The outlook for Deere's segments remains positive. Production and Precision Agriculture and Construction & Forestry are expected to continue benefiting from strong demand, price realization, and increasing shipment volumes. Small Agriculture and Turf sales are expected to be slightly lower year-over-year due to reduced demand for consumer products, though mid-sized equipment demand remains strong. The company's focus on technology and its 'Smart Industrial' operating model is a key driver for future growth.

Deere & Company faces various risks and uncertainties including adverse macroeconomic conditions (inflation, rising interest rates, potential recession), geopolitical instability, changes in trade and environmental policies, supply chain disruptions, currency fluctuations, and the successful execution of its business strategies, particularly its investments in technology and digitalization. Market adoption and regulation of new technologies also present an elevated level of uncertainty.