Deere’s Fiscal Fourth Quarter Results Better Than Feared

By Brian Nelson, CFA

Deere (DE) reported better than expected fiscal fourth quarter results November 21 that showed the company beat expectations on both the top and bottom lines. Worldwide net sales and revenues fell 28% in the quarter, while reported net income per share fell to $4.55 compared with $8.26 per share for the fiscal fourth quarter of last year. Deere ended the quarter with a hefty net debt position. Though the headline results weren’t great, they were better than feared. Management had the following to say about the quarter:

Amid significant market challenges this year, we proactively adjusted our business operations to better align with the current environment. Together with the structural improvements made over the past several years, these adjustments enable us to serve our customers more effectively and achieve strong results across the business cycle.

As we navigate ongoing headwinds across our markets, we remain committed to making meaningful investments in our future while deepening our relationships with customers. Our team of over 75,000 dedicated employees come to work each day with a singular focus: delivering products and solutions that enhance efficiency and reduce operating costs for our customers. By providing the essential tools they need, we empower our customers to succeed and thrive in an ever-evolving and challenging landscape.

ESG Matters

Key excerpts from the Chairman and CEO Letter in its latest Business Impact Report:

“In (its) Ag & Turf Division, (Deere) launched a groundbreaking planting technology called ExactShot that reduces the amount of starter fertilizer needed during planting by more than 60%. (It) also made (its) advanced camera detection and artificial intelligence systems from (its) revolutionary See & Spray platform available as a precision upgrade for previous-generation sprayers, reducing herbicide use, lowering costs, and minimizing impact on crops and the land. And (it) extended (its) smarter spraying capabilities by acquiring Smart Apply, an intelligent spray control system that enhances the precision and performance of air-blast sprayers used in orchards, vineyards, and tree nurseries.”

“(Deere) also introduced several new products and upgrades that support (its) Construction & Forestry customers in working smarter, safer, and more sustainably. (Its) P-Tier line of excavators, optimized for increased productivity, efficiency, and reduced CO2 emissions, has been well-received in the market. (It) expanded (its) Operations Center to include the Wirtgen Group’s equipment, unlocking enhanced operational analysis, monitoring, and project planning opportunities for (its) roadbuilding customers. Looking ahead, (Deere is) excited about (its) upcoming X-Tier Loaders with E-Drive technology, slated to deliver fuel savings, emission reductions, and productivity gains for (its) customers in 2024.”

“Further demonstrating (its) commitment to sustainability, (Deere is) actively engaged in research and development, as well as collaboration efforts, to reduce (its) downstream greenhouse gas emissions. For example, (it is) enhancing (its) best-in-class engine technology to achieve higher levels of efficiency and sustainable performance. Additionally, (it is) driving advancements in battery technology beyond (its) strategic investment in Kreisel Electric, including exploring full battery electric or hybrid applications across (its) product lines. And (its) belief in biofuels as a significant opportunity to drive additional demand for the grains and oilseeds (its) customers grow, while also fostering a sustainable future for (its) larger products, further guides (its) investments and advocacy to enable agriculture to play a critical role in making transportation more sustainable.”

“(Deere is) incredibly proud to celebrate the 75th anniversary of the John Deere Foundation and reflect on its impactful contributions. Over the years, the Foundation has invested more than $400 million in nonprofit organizations, with a remarkable $100 million given in just the last five years. This support extends to (its) Deere home communities and farmers around the world, making a difference where it matters most.” 

“In 2023, the John Deere Foundation announced three of the largest grants in its 75-year history by directing $19 million toward initiatives focused on eliminating hunger by increasing food access, uplifting resource-constrained farmers, and strengthening global food systems. These efforts are aimed at creating sustainable solutions and making a positive impact on food security worldwide…Whether through donating to food banks for emergency hunger assistance or volunteering with local organizations, the entire Deere family is committed to working together to create meaningful impact.”

Image Source: Deere

By 2030, Deere has plans to reduce upstream and downstream (Scope 3) CO2 emissions by 30%, reduce Scope 1 and 2 CO2 emissions by 50%, reduce waste intensity by 15%, and reduce freshwater consumption intensity by 10% at “water-stressed manufacturing locations.” The company is targeting to incorporate “95% of recyclable content into (its) products,” while “ensuring that 65% of content that goes into its products is sustainable.” We especially like Deere’s efforts with respect to waste intensity, working to reuse wood instead of shredding or discarding it. The company has Diversity, Equity, and Inclusion principles embedded into all aspects of its business.  

Concluding Thoughts 

Looking to fiscal 2025, Deere expects Production & Precision Ag net sales down ~15%, Small Ag & Turf net sales down 10%, and Construction & Forestry net sales down 10%-15%. Net income for its Financial Services segment is targeted at $750 million for the year. Net income attributable to Deere & Company for fiscal 2025 is expected to be in the range of $5-$5.5 billion, down from $7.1 billion in fiscal 2024 and $10.2 billion in fiscal 2023. Deere’s top line continues to face pressure, and its balance sheet isn’t as strong as we would like, but the company is navigating weakness well. Shares yield 1.3%.

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