10-QPeriod: Q3 FY2024

DEERE & CO Quarterly Report for Q3 Ended Jul 28, 2024

Filed August 29, 2024For Securities:DE

Summary

Deere & Company's (DE) third-quarter and nine-month fiscal year 2024 results show a notable decrease in net sales and net income compared to the prior year. This decline is primarily attributed to lower sales volumes across its Production and Precision Agriculture (PPA), Small Agriculture and Turf (SAT), and Construction and Forestry (CF) segments. Factors such as moderating agricultural fundamentals, rising interest rates, and inventory management have impacted demand. Despite the top-line and bottom-line contraction, the company continues to invest in technology and its Smart Industrial Operating Model. The Financial Services segment showed revenue growth but faced challenges with increased provisions for credit losses and less favorable financing spreads. Deere is actively managing its operational efficiency, implementing employee-separation programs aimed at reducing costs and aligning with strategic priorities. The company also announced plans to sell a 50% stake in its Brazilian financial services subsidiary, Banco John Deere S.A., as part of a strategic move to reduce risk in the Brazilian market. While facing headwinds in its core equipment businesses, Deere remains focused on long-term growth drivers like technology integration and lifecycle solutions.

Financial Highlights

39 data points
Beta

Revenue

$13.15B

Net Income

$1.73B

13.2% Net Margin

EPS (Diluted)

$6.29

Total Assets

$107.84B

Cash & Equivalents

$7.00B

Free Cash Flow

$2.87B

Financial Statements
Beta
Revenue$13.15B
R&D Expenses$567.00M
SG&A Expenses$1.28B
Operating Expenses$10.80B
Interest Expense$840.00M
Net Income$1.73B
EPS (Basic)$6.32
EPS (Diluted)$6.29
Shares Outstanding (Basic)274.50M
Shares Outstanding (Diluted)275.60M

Key Highlights

  • 1Net sales decreased by 17% in the third quarter and 11% year-to-date, driven by lower sales volumes across PPA, SAT, and CF segments.
  • 2Net income attributable to Deere & Company decreased by 42% in the third quarter and 25% year-to-date, reflecting lower sales and increased operating expenses.
  • 3The company announced employee-separation programs estimated to cost $150 million pretax, with $124 million recognized in the third quarter, expected to yield annual pretax savings of $230 million.
  • 4Deere is planning to sell a 50% stake in its Brazilian financial services subsidiary, Banco John Deere S.A. (BJD), to Banco Bradesco S.A., with the transaction expected in Q2 2025.
  • 5Financial Services segment revenue increased by 15% in the third quarter and 21% year-to-date, though net income saw a decrease due to higher credit loss provisions and reduced financing spreads.
  • 6The company continues to invest in technology and its Smart Industrial Operating Model and Leap Ambitions, despite moderating demand in agriculture and turf markets.
  • 7Total debt increased by approximately $2.44 billion in the first nine months of 2024, reflecting the need to fund receivable and lease portfolios.

Frequently Asked Questions

The primary reason for the decrease in net sales and income is lower sales volumes across the Production and Precision Agriculture (PPA), Small Agriculture and Turf (SAT), and Construction and Forestry (CF) segments. This is attributed to moderating agricultural fundamentals, higher interest rates impacting customer demand, and ongoing inventory management efforts by the company.

Deere is selling a 50% stake in its Brazilian financial services subsidiary, Banco John Deere S.A. (BJD), to Banco Bradesco S.A. This strategic move is intended to reduce Deere's incremental risk in the Brazilian market while continuing its growth initiatives there. The transaction is expected to close in the second quarter of 2025, and BJD will be accounted for as an equity investment thereafter.

Deere has implemented employee-separation programs for its salaried workforce, which are estimated to cost $150 million pretax and are expected to yield annual pretax savings of $230 million. These programs are designed to meet strategic priorities by reducing overlap and redundancy. Additionally, the company is managing production volumes to align with forecasted demand.

The Financial Services segment experienced revenue growth due to higher average portfolio balances and increased financing rates. However, net income decreased primarily due to a higher provision for credit losses and less favorable financing spreads, influenced by rising interest rates and market conditions. The segment is also managing the reclassification of assets and liabilities related to Banco John Deere S.A. as held for sale.