01—Abstract
Summary
Summary of the 10-Q filed May 30, 2024. Cited figures are marked; the original filing is the authoritative source.
Deere & Company's second-quarter fiscal 2024 10-Q (quarter ended April 28, 2024) shows a clear cyclical downturn in equipment demand, with net sales and revenues falling 12% to $15.2 billiona for the quarter and 9% to $27.4 billion year-to-date.
Net income attributable to Deere fell 17% to $2.37 billionb in the quarter and 14% to $4.12 billion for six months, and diluted EPS dropped to $8.53 from $9.65 (quarter) and $14.74 from $16.18 (six months). Production & precision agriculture and small agriculture & turf sales declined sharply, with segment operating margins compressing (PPA 25.1% vs. 27.7%; SAT 17.9% vs. 20.5%). Management guides to continued production declines through the rest of 2024, lower agricultural industry sales in North America, Europe, and South America, and flat-to-down construction equipment demand.
Financial services was a bright spot, with quarterly net income rising to $162 millionc from $28 million, driven by a larger average portfolio, though this was partly offset by a higher provision for credit losses tied to elevated agricultural delinquencies. Interest expense rose 47% in the quarter as borrowing rates and balances increased, and it is a material drag on consolidated earnings. Operating cash flow was only $944 million in the first half versus a $147 million outflow a year earlier, while shareholder returns of $3.2 billion (buybacks plus dividends) were partly funded by new external borrowings, which rose by about $2.2 billion in the first six months.
Balance sheet strength remains solid, with cash and marketable securities of $6.6 billiond, a stable A-range credit profile (A+/A1/A ratings with stable outlooks), and a $1.47 quarterly dividend declared. Investors should weigh the near-term earnings pressure from volume declines and margin compression against Deere's continued buybacks, technology investments, and the resilience of its financial services portfolio.
02—Key points
Key Highlights
- Net sales and revenues fell 12% to $15.2 billion in Q2 2024 and 9% to $27.4 billion year-to-date, driven primarily by lower shipment volumes in agriculture and turf.
- Net income attributable to Deere declined 17% to $2.37 billion in Q2 (diluted EPS $8.53 vs. $9.65) and 14% to $4.12 billion year-to-date (diluted EPS $14.74 vs. $16.18).
- Production & precision ag operating margin compressed to 25.1% from 27.7%, and small ag & turf margin fell to 17.9% from 20.5%, reflecting lower volumes and higher costs.
- Financial services net income rose to $162 million in Q2 from $28 million, supported by a 16% larger average receivable and lease portfolio, though interest expense climbed 47% to $836 million consolidated.
- Operating cash flow was $944 million in the first six months of 2024 versus a $147 million outflow in 2023, while $3.2 billion was returned to shareholders through buybacks and dividends.
- Management expects equipment production to keep declining through 2024, with lower agricultural sales in North America, Europe, and South America and flat-to-down construction industry sales.
- Credit quality is under pressure, with the allowance for credit losses increased on elevated agricultural delinquencies, and the company maintains A-range ratings with stable outlooks.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed May 30, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $15.23B$17.39B | −12.4% |
| R&D Expenses | $565.00M$547.00M | +3.3% |
| SG&A Expenses | $1.26B$1.33B | −4.9% |
| Operating Expenses | $12.12B$13.54B | −10.5% |
| Interest Expense | $836.00M$569.00M | +46.9% |
| Net Income | $2.37B$2.86B | −17.1% |
| EPS (Basic) | $8.56$9.69 | −11.7% |
| EPS (Diluted) | $8.53$9.65 | −11.6% |
| Shares Outstanding (Basic) | 276.80M295.10M | −6.2% |
| Shares Outstanding (Diluted) | 277.90M296.50M | −6.3% |
05—Questions
Frequently Asked Questions
Why did Deere's earnings decline in the second quarter of fiscal 2024?
The decline was driven mainly by lower sales volumes in production & precision agriculture and small agriculture & turf, which pushed down operating profit and margins. Higher interest expense, higher R&D and SG&A spending, and a higher provision for credit losses also weighed on results, partially offset by price realization.
Is Deere's financial services segment still growing?
Yes. Financial services revenues rose 26% in Q2 and operating profit rose to $209 million from $41 million. Growth came from a larger average portfolio and higher financing rates, though rising borrowing costs and credit-loss provisions limited the benefit.
What is management's outlook for the rest of 2024?
Management expects production volumes to continue declining through the remainder of 2024. Large and small agricultural equipment sales are forecast to be lower than 2023 in North America, Europe, and South America, while construction equipment industry sales are expected to be flat to down.
Is Deere's balance sheet and liquidity still healthy?
Deere had $6.6 billion in cash and marketable securities at April 28, 2024, and access to $10.9 billion in worldwide credit lines with $2.8 billion unused. Its ratings are A+ (Fitch), A1 (Moody's), and A (S&P), all with stable outlooks, although total external borrowings rose by $2.2 billion in the first half.
Will Deere continue returning cash to shareholders?
Deere has continued both buybacks and dividends. It repurchased about $2.4 billion of stock in the first half, and its board declared a quarterly dividend of $1.47 per share on May 29, 2024. About $10.5 billion remained under its $18.0 billion repurchase authorization at quarter-end.
06—Continue