Agricultural and construction equipment manufacturer Deere & Co. (DE 0.96%)reported earnings for the fiscal 2024 fourth quarter and full year on Thursday, Nov. 21, which topped estimates but showed significant revenue and profit declines across all major segments.
Earnings per share (EPS) of $4.55 exceeded the anticipated $3.87 while worldwide net sales and revenues dropped by 28% from the previous year. The downward trend reflects the challenging market environment Deere is currently operating in. While its profitability was a bright spot, Deere's overall quarterly results were largely negative and included a cautious outlook ahead.
| Metric | Q4 2024 | Analyst Estimate | Q4 2023 | Change (YOY) |
|---|---|---|---|---|
| Revenue | $11.14 billion | $9.2 billion | $15.41 billion | (28%) |
| Net income | $1.245 billion | N/A | $2.37 billion | (47%) |
| EPS | $4.55 | $3.87 | $8.26 | (45%) |
| Production & Precision Agriculture sales | $4.31 billion | N/A | $6.97 billion | (38%) |
| Small Agriculture & Turf sales | $2.31 billion | N/A | $3.09 billion | (25%) |
| Construction & Forestry sales | $2.66 billion | N/A | $3.74 billion | (29%) |
Source: Deere & Co. Note: Analyst consensus estimates for the quarter provided by FactSet. YOY = Year over year.
Overview of Deere & Company's Business
Deere & Co., commonly known as John Deere, is an industry leader in manufacturing agricultural, construction, and forestry machinery. It also offers financial services related to its product portfolio. A key strategic focus for Deere is embedding technology within its machinery to boost productivity and operational efficiency. This is embodied in its Smart Industrial Operating Model and Leap Ambitions, which aim to provide intelligent solutions to enhance customer value.
As part of its ongoing strategy, Deere has been working on adopting precision technology solutions and implementing lifecycle solutions for its products. By doing so, the company seeks to provide sustainable solutions that meet the evolving needs of its customers, assisting them in reducing costs and improving productivity.
Notable Developments During the Quarter
Deere's Production & Precision Agriculture sales fell by 38% in Q4, while Small Agriculture & Turf sales decreased by 25%. Construction & Forestry segment sales dropped by 29%. The company attributed these declines primarily to reduced shipment volumes, despite mitigation efforts through price realizations.
Operating profits followed a similar downward trend. Production & Precision Agriculture saw a drop of 64% in operating profit. In contrast, Small Agriculture & Turf and Construction & Forestry faced respective declines of 47% and 36% in their operating profits. Historical market conditions, alongside elevated warranty expenses and reduced production costs, influenced these outcomes.
Technological advancements took center stage in Deere's strategic efforts, particularly with products such as See & Spray gaining traction among customers. This precision agriculture tool exemplifies the company's focus on incorporating technology into farming equipment to enhance efficiency.
Looking at fiscal year trends, Deere anticipated a reduction in sales across segments, driven by muted market demand and external market challenges. Additionally, the forecast for many key regions and segments projected continued declines, aligning with the company's proactive adjustments in anticipation of difficult market conditions. Notably, neither dividends nor major one-time events significantly impacted the quarter's financial results.
Prospects and Financial Outlook
Looking forward, Deere management provided soft guidance for fiscal 2025, reflecting ongoing market challenges. The company projects net income between $5 billion and $5.5 billion, a stark decrease from the $7.1 billion recorded in fiscal 2024. In light of anticipated pressures across its segments, Deere forecasts a 15% decline in Production & Precision Agriculture sales, 10% in Small Agriculture & Turf, and a 10% to 15% drop in Construction & Forestry sales.
For investors, the spotlight remains on Deere's technological advancements as it pursues growth through innovation amid a challenging economic backdrop. As part of its strategic outlook, the company will focus on managing inventory levels and further deploying technologies that improve productivity and cost-efficiency for its customers. Deere's ongoing commitment to maintaining a solid market presence while navigating current challenges will be vital for future performance assessments.
