10-QPeriod: Q1 FY2024

DEERE & CO Quarterly Report for Q1 Ended Jan 28, 2024

Filed February 29, 2024For Securities:DE

Summary

Deere & Company (DE) reported its fiscal first quarter 2024 results on February 28, 2024, for the period ending January 28, 2024. Total net sales and revenues decreased by 4% year-over-year to $12.185 billion, primarily driven by lower sales volumes across its agricultural and turf segments. Net income attributable to Deere & Company saw a decrease of 11% to $1.751 billion, resulting in diluted earnings per share of $6.23, down from $6.55 in the prior year. The company cited moderating agricultural fundamentals, including lower commodity prices and elevated interest rates, as key factors influencing the decline in sales and profit, particularly in its Production & Precision Agriculture and Small Agriculture & Turf segments. Despite the overall revenue decline, the Financial Services segment demonstrated strength with a 32% increase in revenues and a 12% rise in net income, benefiting from higher average portfolio balances and financing rates, though partially offset by less favorable financing spreads due to rising interest rates. Deere also announced continued focus on its Smart Industrial Operating Model and Leap Ambitions, investing in technology and intelligent solutions. The company provided a cautious outlook for fiscal year 2024, forecasting lower production volumes and moderate declines in agricultural equipment sales due to a softening market and inventory adjustments.

Financial Highlights

39 data points
Beta

Revenue

$12.19B

Net Income

$1.75B

14.4% Net Margin

EPS (Diluted)

$6.23

Total Assets

$101.37B

Cash & Equivalents

$5.14B

Free Cash Flow

-$1.27B

Financial Statements
Beta
Revenue$12.19B
R&D Expenses$533.00M
SG&A Expenses$1.07B
Operating Expenses$9.97B
Interest Expense$802.00M
Net Income$1.75B
EPS (Basic)$6.25
EPS (Diluted)$6.23
Shares Outstanding (Basic)279.90M
Shares Outstanding (Diluted)281.10M

Key Highlights

  • 1Total net sales and revenues decreased by 4% to $12.185 billion in Q1 2024 compared to Q1 2023, primarily due to lower sales volumes.
  • 2Net income attributable to Deere & Company decreased by 11% to $1.751 billion, with diluted EPS falling to $6.23 from $6.55 year-over-year.
  • 3The Production & Precision Agriculture and Small Agriculture & Turf segments experienced sales declines of 7% and 19% respectively, attributed to moderating agricultural fundamentals and inventory management.
  • 4The Construction & Forestry segment's sales remained flat, with price realization offset by lower shipment volumes.
  • 5Deere's Financial Services segment saw a significant 32% revenue increase and a 12% rise in net income, driven by a larger financed portfolio and higher rates.
  • 6Operating profit decreased across most segments, with Production & Precision Agriculture down 13% and Small Agriculture & Turf down 27%, reflecting lower volumes and increased operating expenses.
  • 7The company reported a cautious outlook for fiscal year 2024, anticipating lower production volumes and moderating demand in key agricultural markets.

Frequently Asked Questions

The primary driver for the 4% decrease in net sales and revenues to $12.185 billion was lower sales volumes, particularly in the Production & Precision Agriculture and Small Agriculture & Turf segments. This was attributed to moderating agricultural fundamentals, such as lower commodity prices and elevated interest rates, alongside efforts to manage inventory levels in certain regions.

The Financial Services segment showed strong performance, with revenues increasing by 32% and net income rising by 12%. This growth was primarily driven by a higher average portfolio of receivables and leases and increased financing rates. This segment provided a counterweight to the declines experienced in the equipment segments.

Deere anticipates lower production volumes and moderating demand for agricultural equipment in fiscal year 2024. Key factors influencing this outlook include continued high interest rates, lower commodity prices, and the ongoing process of bringing inventory levels in line with demand. The company expects these conditions to impact sales and profitability across its agricultural segments.

Deere maintained access to global markets and utilized various sources of liquidity, including cash on hand, operational funds, debt issuance, and securitization programs. Total external borrowings decreased slightly in the quarter but increased year-over-year, generally corresponding with the level of receivables and lease portfolios. The company reported adequate liquidity to meet its short-term and long-term funding needs, with unused credit lines totaling $1.577 billion at the end of the quarter.