Key takeaways
View moreDeere & Co.'s current valuation appears fair when considering its strong market position, technological initiatives, and growth prospects balanced against its financial risks and cyclical industry challenges. While some metrics suggest overvaluation (e.g., EV/EBITDA), others indicate potential undervaluation (e.g., declining but still strong profitability metrics). The company's focus on precision agriculture and geographic expansion provides upside potential that offsets concerns about high leverage and weak liquidity.
- Deere & Co.'s revenue has declined significantly, from $15.24 billion in Q2 2024 to $8.52 billion in Q1 2025, indicating potential challenges in maintaining sales volume.
- The company's liquidity position is weak, with a current ratio of 0.71 and a quick ratio of 0.48, both below industry averages, signaling potential short-term financial difficulties.
- Deere & Co. has a high debt-to-equity ratio of 287.62%, significantly above the industry average, indicating high financial leverage and increased vulnerability to economic downturns.
- Despite declining revenue and net income, Deere maintains strong gross profit margins, around 40%, suggesting effective cost management.
- Management is focused on proactive inventory management and technology adoption, particularly in precision agriculture, as key strategic initiatives to navigate the downturn, as highlighted in the recent earnings call.
- Deere & Co. is facing legal challenges related to equipment repair restrictions, which could impact its business model and profitability, as detailed in SEC filings.
- The company's future performance will depend on its ability to navigate macroeconomic uncertainty, high interest rates, and currency fluctuations, as well as capitalize on growth opportunities in precision agriculture and geographic expansion.
Evaluation summary
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Company Overview:
- Deere & Co. (DE) is a global leader in the production and distribution of agricultural, turf, construction, and forestry equipment. Its key products include tractors, combines, and various types of machinery used in construction, earthmoving, and timber harvesting. The company operates through three main segments: Agriculture and Turf, Construction and Forestry, and Financial Services. The Agriculture and Turf segment focuses on equipment and related service parts, while the Construction and Forestry segment offers machines and service parts for construction and timber harvesting. The Financial Services segment finances sales and leases.
- Deere sells its products through independent retail dealer networks and directly to retail customers in some markets.
- The benchmarks used for comparative analysis include the Industrial Select Sector SPDR Fund (XLI), and the peers used for comparison are AGCO Corp. (AGCO) and CNH Industrial NV (CNHI).
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Financial Performance:
- Deere & Co. has experienced a decline in revenue over the past four quarters. Revenue decreased from $15.24 billion in the quarter ending April 30, 2024, to $8.52 billion in the quarter ending January 31, 2025.
- Net income has also decreased significantly, from $2.37 billion in the quarter ending April 30, 2024, to $869 million in the quarter ending January 31, 2025.
- Despite the decline in revenue and net income, the gross profit margin has remained relatively stable, ranging from 39.84% to 41.26% over the past four quarters. For the quarter ending January 31, 2025, the gross profit margin was 41.26%.
- The net profit margin has decreased from 15.55% in the quarter ending April 30, 2024, to 10.21% in the quarter ending January 31, 2025.
- Deere's Return on Assets (ROA) has decreased from 9.28% to 6.08%, Return on Equity (ROE) from 42.01% to 27.91%, and Return on Invested Capital (ROIC) from 15.57% to 9.71% over the same period.
- Compared to the industry average, Deere's ROA (6.08%), ROE (27.91%), and ROIC (9.71%) are significantly higher than the industry averages of 2.18%, 1.06%, and -0.26%, respectively, indicating better profitability and efficiency in utilizing assets and capital.
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Operational Efficiency:
- Total current assets decreased from $50.87 billion in the quarter ending October 31, 2024, to $23.47 billion in the quarter ending January 31, 2025, primarily due to a decrease in total accounts receivable from $35.30 billion to $7.91 billion.
- Total current liabilities decreased from $36.51 billion to $32.99 billion over the same period.
- Working capital is negative, at -$9.52 billion for the quarter ending January 31, 2025, and was also negative at -$11.98 billion for the quarter ending July 31, 2024, indicating potential short-term liquidity challenges.
- Net operating cash flow decreased from $5.09 billion in the quarter ending October 31, 2024, to -$1.13 billion in the quarter ending January 31, 2025.
- Free cash flow to equity is negative, at -$1.92 billion for the quarter ending January 31, 2025.
- Capital expenditure was $791 million for the quarter ending January 31, 2025, while depreciation, depletion, and amortization were $549 million.
- Cash dividends paid were $403 million for the quarter ending January 31, 2025.
- The current ratio is 0.71, and the quick ratio is 0.48, both below the industry averages of 2.75 and 1.67, respectively, indicating potential liquidity issues.
- The debt-to-equity ratio is 287.62%, significantly higher than the industry average of 106.13%, indicating high financial leverage.
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Growth Opportunities:
- Deere & Co. is focusing on advancing precision agriculture technologies, automation, and alternative power solutions to drive future growth, as highlighted in SEC filings.
- The company is investing in a new technology development center in Brazil, as mentioned in the earnings call, to support the adoption of precision agriculture technologies.
- Deere is strategically focusing on technology adoption and the positive reception of its Precision Ag Essentials kits and JDLink Boost in Brazil, emphasizing the importance of connectivity and digital solutions for customer value, as noted in the earnings call.
- The company is also working on geographic expansion plans, particularly in regions like Brazil, where there is strong adoption of precision agriculture technologies.
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Recent Developments and Market Sentiment:
- The recent earnings call for Q1 2025 revealed a 35% year-over-year decline in equipment sales, primarily due to planned underproduction to manage inventory levels and the timing of shipments.
- Management maintained its full-year net income guidance despite the sales shortfall, attributing it to timing and currency fluctuations.
- The company is proactively managing inventory levels, which is seen as a key strategic differentiator.
- Currency fluctuations, particularly the strengthening US dollar, significantly impacted Deere's revenue and profitability.
- Macroeconomic uncertainty and high interest rates continue to constrain equipment demand, impacting sales across segments.
- Analysts are focused on the company's inventory management strategies, the progress of precision agriculture technologies, and the impact of farmer profitability on equipment demand.
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Risks and Threats:
- Deere & Co. faces risks related to dependence on the agricultural market business cycle and general economic conditions, as highlighted in SEC filings.
- The company is exposed to political, economic, and social uncertainty in certain regions globally.
- Disruptions in the supply chain and changes in raw material/component availability and pricing pose risks.
- Cybersecurity threats and unauthorized access to products, systems, and data are also significant concerns.
- Regulatory compliance risks related to environmental, trade, product safety, and other laws/policies exist.
- Deere is facing a consolidated multidistrict class action lawsuit alleging monopolization and exclusionary conduct related to equipment repair services, as well as a lawsuit filed by the FTC and several state Attorneys General making similar allegations about equipment repair restrictions.
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Valuation Analysis:
- The Enterprise Value to EBITDA ratio is 11.38, and the Enterprise Value to Sales ratio is 3.26, based on the most recent data.
- Compared to industry averages, Deere's valuation metrics are relatively high, suggesting that the company may be overvalued compared to its peers.
- Potential catalysts include improving ag fundamentals, government support, and continued technology adoption, while headwinds include macro uncertainty, high interest rates, and potential tariff impacts.
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Price Performance:
- Deere & Co.'s stock price has fluctuated between $464.98 and $509.27 from January 29, 2025, to March 28, 2025.
- Deere & Co. (DE) has shown mixed performance compared to the Industrial Select Sector SPDR Fund (XLI). Over shorter periods like Year-To-Date, 1 Week, 1 Month, 3 Months, 6 Months, and 1 Year, DE has outperformed XLI, with outperformance ranging from 0.03% to 15.05%. However, over longer periods of 2 and 3 years, DE has underperformed XLI by -16.27% and -14.42%, respectively.
- Deere & Co. (DE) has generally outperformed AGCO Corp. (AGCO) and CNH Industrial NV (CNHI) across most time periods. Over the last 1, 2, and 3 years, DE has shown significantly higher returns compared to its peers.
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Future Outlook:
- Management maintains its full-year net income guidance of $5 billion to $5.5 billion despite the weaker-than-expected first quarter.
- Sales guidance was revised downward for several segments due to currency headwinds.
- The effective tax rate guidance was adjusted to 20%-22%.
- Operating cash flow guidance remained at $4.5 billion to $5.5 billion.
- The company expects to recover the first-quarter shortfall in shipments over the remainder of the year.
- Significant risks include macro uncertainty, high interest rates, and potential tariff impacts.
- Opportunities lie in improving ag fundamentals, government support, and continued technology adoption.
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Summary:
- Deere & Co. is facing challenges in revenue growth and profitability, as evidenced by declining sales and net income.
- The company's liquidity position is weak, with a current ratio below the industry average, indicating potential short-term financial difficulties.
- Deere & Co. has a high level of financial leverage, which increases its vulnerability to economic downturns and interest rate fluctuations.
- Despite these challenges, the company maintains strong gross profit margins and efficient asset utilization, suggesting effective cost management.
- Deere & Co. needs to focus on improving revenue growth, controlling operating expenses, and managing debt levels to ensure long-term financial stability.
- SWOT Analysis:
- Strengths: Strong brand reputation, efficient cost management, high return on assets and equity compared to industry averages.
- Weaknesses: Declining revenue and net income, weak liquidity position, high financial leverage, negative working capital.
- Opportunities: Advancing precision agriculture technologies, geographic expansion in regions like Brazil, government support for the agricultural sector.
- Threats: Dependence on the agricultural market cycle, macroeconomic uncertainty, high interest rates, supply chain disruptions, regulatory compliance risks, legal proceedings.
- Overall, Deere & Co. presents a mixed investment profile. While the company has strong brand recognition and efficient operations, it faces significant challenges related to declining revenue, weak liquidity, and high financial leverage. The company's future performance will depend on its ability to navigate these challenges and capitalize on growth opportunities in precision agriculture and geographic expansion. Further monitoring of key financial metrics, such as revenue growth, liquidity ratios, and debt levels, is essential for stakeholders.
Price history
Fundamentals
Insights
- Deere & Co. is facing challenges in revenue growth and profitability, as evidenced by declining sales and net income.
- The company's liquidity position is weak, with a current ratio below the industry average, indicating potential short-term financial difficulties.
- Deere & Co. has a high level of financial leverage, which increases its vulnerability to economic downturns and interest rate fluctuations.
- Despite these challenges, the company maintains strong gross profit margins and efficient asset utilization, suggesting effective cost management.
- Deere & Co. needs to focus on improving revenue growth, controlling operating expenses, and managing debt levels to ensure long-term financial stability.
Analysis
- Revenue
- Revenue has been decreasing, indicating potential challenges in maintaining sales volume.
- The decline in revenue is consistent across multiple quarters, suggesting a persistent issue rather than a one-time event.
- This trend is concerning, as it directly impacts the company's ability to generate profits and maintain its financial health.
- Profitability
- Despite decreasing revenue, the gross profit margin remains strong, indicating efficient cost management.
- However, net profit margin and EBITDA margin are declining, suggesting that operating expenses and other factors are impacting overall profitability.
- While profitability metrics are still above industry averages, the downward trend is a cause for concern.
- Liquidity
- The current ratio and quick ratio are below industry averages, indicating potential short-term liquidity issues.
- This suggests that the company may face challenges in meeting its short-term obligations.
- Monitoring and improving liquidity will be crucial for maintaining financial stability.
- Solvency
- The total debt to total equity ratio is significantly higher than the industry average, indicating higher financial leverage.
- The debt/EBITDA ratio is also above the industry average, suggesting a higher burden of debt relative to earnings.
- High leverage can increase financial risk and limit the company's flexibility in responding to market changes.
- Operational Efficiency
- The company demonstrates efficient cost management, as evidenced by the high gross profit margin.
- High return on assets and equity suggest effective asset utilization.
- However, declining revenue and profitability indicate that operational efficiency may need to be further improved.
- Cash Flow Analysis - Net operating cash flow has decreased, driven by lower net income and negative changes in working capital. - Free cash flow is negative, indicating that the company is not generating enough cash from operations to cover its investments. - This is a significant concern, as it limits the company's ability to fund future growth and shareholder returns.
- Risk Factors
- High financial leverage increases the company's vulnerability to economic downturns and interest rate fluctuations.
- Declining revenue and profitability pose a threat to the company's long-term financial health.
- Short-term liquidity issues could limit the company's ability to meet its obligations.
- Future Outlook
- The company needs to focus on improving revenue growth and controlling operating expenses to restore profitability.
- Managing debt levels and improving liquidity will be crucial for maintaining financial stability.
- Monitoring key financial metrics and adapting to market changes will be essential for future success.
- Profitability
Financial statements
Public filings
- Deere & Co. is a global leader in agricultural, turf, construction, and forestry equipment, facing headwinds from cyclical agricultural markets, supply chain disruptions, and regulatory changes
- The company is navigating a challenging operating environment marked by declining sales volumes, higher costs, and elevated credit risks, leading to reduced profitability
- Deere is responding with cost-cutting measures and strategic initiatives to advance its technology offerings and reduce risk, but faces significant legal and regulatory risks related to equipment repair restrictions
- The company maintains a strong liquidity position, but declining operating cash flows and the potential impact of ongoing legal proceedings present financial and operational uncertainties
Core Business and Operations:
- Deere & Company is a global leader in the production of agricultural, turf, construction, and forestry equipment and solutions
- The company operates through four main business segments: Production and Precision Agriculture (PPA), Small Agriculture and Turf (SAT), Construction and Forestry (CF), and Financial Services (FS)
- Key products include tractors, combines, cotton pickers, sugarcane harvesters, hay and forage equipment, turf equipment, construction and forestry machinery, and related attachments and service parts
- The company sells its products through independent retail dealer networks and major retail outlets, as well as directly to retail customers in some markets
- Major competitors include AGCO Corporation, CNH Industrial N.V., Kubota Tractor Corporation, and Caterpillar Inc.
Industry and Market Trends:
- The agricultural equipment industry is affected by factors like commodity prices, acreage planted, crop yields, government policies, and general economic conditions
- Demand for turf and construction equipment is influenced by housing starts, energy prices, and overall construction activity
- Increasing adoption of precision agriculture technologies, automation, and alternative power solutions are key industry trends
- Regulatory changes related to emissions, climate change, and product life cycle management present both opportunities and challenges
Recent Events:
- Implemented employee-separation programs in 2024 to reduce overlap and redundancy in roles and responsibilities
- Entered into a joint venture agreement with Banco Bradesco S.A. to reduce Deere's incremental risk in the Brazilian market by selling 50% ownership of Banco John Deere S.A.
- Reached legal settlements concerning patent infringement claims, providing a $57 million pretax gain
- Recorded a $28 million pretax impairment charge for an other-than-temporary decline in value of an investment
Risk Factors:
- Dependence on the agricultural market business cycle and general economic conditions
- Exposure to political, economic, and social uncertainty in certain regions globally
- Disruptions in the supply chain and changes in raw material/component availability and pricing
- Cybersecurity threats and unauthorized access to products, systems, and data
- Regulatory compliance risks related to environmental, trade, product safety, and other laws/policies
- Legal proceedings, disputes, and government investigations
Legal Matters:
- Facing a consolidated multidistrict class action lawsuit alleging monopolization and exclusionary conduct related to equipment repair services
- Subject to a lawsuit filed by the FTC and several state Attorneys General making similar allegations about equipment repair restrictions
- Accrued losses on various unresolved legal actions are not considered material at this time
Management's Discussion and Analysis:
- Revenues and profits declined in 2024 and 2025 YTD due to lower sales volumes across all segments
- Profitability impacted by higher production costs, sales incentives, receivable write-offs, and credit losses
- Implemented cost reduction measures including employee-separation programs to manage profitability
- Liquidity remains strong with access to global financing markets, though operating cash flows are expected to be lower in 2025
- Focused on advancing precision agriculture technologies, automation, and alternative power solutions to drive future growth
Earnings calls
Earnings Report 2025Q1 (2025-02-13)
Key takeaways
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Inventory Management is Crucial: Deere's proactive approach to reducing inventory levels is a key strategic differentiator, positioning the company favorably for a market recovery.
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Currency Fluctuations Pose a Significant Risk: The strengthening US dollar significantly impacted Deere's revenue and profitability, highlighting the importance of currency hedging strategies.
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Technology Adoption is a Growth Driver: The strong adoption of Deere's precision agriculture technologies, particularly in Brazil, indicates a significant growth opportunity.
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Macroeconomic Uncertainty Remains a Headwind: High interest rates and general economic uncertainty continue to constrain equipment demand, impacting sales across segments.
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Government Support Offers a Partial Offset: Government aid packages for farmers provide some support to the agricultural equipment market, but their impact on immediate equipment demand is likely limited.
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Used Inventory Reduction is a Multi-Quarter Effort: The reduction of excess used inventory is a significant undertaking that will likely extend beyond the current fiscal year.
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Margin Recovery is Expected, but with Segment-Specific Cadences: While overall margin improvement is anticipated, the trajectory will vary across segments due to factors such as planned underproduction and pricing strategies.
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Deere Maintains a Cautiously Optimistic Outlook: Despite the challenging market conditions, Deere maintains a positive outlook for the long term, emphasizing its strategic focus on cost management, technology, and customer support.
Focus of management’s prepared remarks
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First Quarter Performance and Full-Year Outlook: Deere reported a 35% year-over-year decline in equipment sales for Q1, primarily due to planned underproduction to manage inventory levels and the timing of shipments. Despite this, the company maintained its full-year net income guidance, attributing the sales shortfall to timing and currency fluctuations.
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Global Agricultural Market Conditions: The prepared remarks detailed the company's outlook for agricultural equipment sales globally, noting improving ag fundamentals in some regions (Brazil, parts of Europe) but persistent challenges in North America due to high interest rates, macro uncertainty, and elevated used inventory levels. The outlook for large ag equipment sales in the US and Canada was projected to be down approximately 30%.
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Construction and Forestry Market Conditions: The outlook for the construction and forestry segment was also presented, highlighting the impact of elevated interest rates and macro uncertainty on demand. Planned underproduction in earthmoving was a key factor influencing the first-quarter results. The company expects industry sales for earthmoving equipment in the US and Canada to be down around 10%.
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Financial Services Operations: Management briefly discussed the performance of Deere's financial services operations, noting a favorable impact from a decreased valuation allowance on assets held for sale but also a higher provision for credit losses. The full-year outlook for net income from financial services remained at $750 million.
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Inventory Management: A significant portion of the prepared remarks focused on Deere's proactive inventory management strategy, emphasizing the success in reducing field inventory levels in various product lines and geographies to position the company for a challenging year.
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Technology Adoption and Precision Agriculture: The company highlighted its strategic focus on technology adoption and the positive reception of its Precision Ag Essentials kits and JDLink Boost in Brazil, emphasizing the importance of connectivity and digital solutions for customer value.
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Guidance for Fiscal Year 2025: The prepared remarks concluded with a summary of the company's guidance for net income, effective tax rate, and operating cash flow for fiscal year 2025, reiterating the company's commitment to its full-year net income guidance despite the first-quarter challenges.
Focus of the analyst Q&A
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Large Ag Production Cadence and Seasonal Ramp-Up: Analysts sought clarification on the production cadence for large ag equipment, specifically regarding the impact of shipment delays on the typical seasonal ramp-up in the second and third quarters. The question focused on the potential for a more pronounced shift towards third-quarter production.
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Confidence in Market Bottoming and Inventory Management: Analysts expressed concern about the confidence in the market bottoming process, referencing weak numbers from the Association of Equipment Manufacturers (AEM) and the company's early order program results being below industry forecasts. The question highlighted the need for alignment between inventory management strategies and the actual trajectory of end-market activity.
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Precision Agriculture Progress and Global Expectations: Analysts requested an update on the global expectations for Precision Ag Essentials and Sense Sprayer kits, including progress in the first quarter and an update on engaged and highly engaged acres. This indicated a focus on the growth and adoption of Deere's precision agriculture technologies.
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Farmer Profitability and Demand: Analysts sought insight into the profitability of Deere's largest customers at current commodity prices and the breakeven corn prices needed for used equipment buyers to become profitable and facilitate inventory reduction. This highlighted the importance of understanding the financial health of the customer base and its impact on equipment demand.
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Deere's Margin Performance and Mid-Cycle Target: Analysts inquired about Deere's margin performance relative to its 20% mid-cycle target, expressing interest in the company's confidence in a market recovery in 2026 and the potential need for further restructuring if a recovery does not materialize. This indicated a focus on long-term profitability and the company's strategic response to cyclical market conditions.
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Quantification of Excess Used Inventory: Analysts sought to quantify the level of excess used inventory and the timeframe for managing it down to target levels. This highlighted the importance of understanding the magnitude of the inventory challenge and the company's plan to address it.
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North American New Inventory Levels: Analysts sought clarification on the company's commentary regarding North American new inventory levels, specifically questioning whether further reductions were planned beyond the stated goal of maintaining year-over-year levels. This indicated a focus on the company's inventory management strategy and its implications for future production.
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Price Realization and Incentives: Analysts inquired about the company's confidence in its price realization guidance for the Production & Precision Ag segment and the Construction & Forestry segment, considering the use of incentives to support used inventory reduction and competitive dynamics. This highlighted the importance of understanding pricing strategies and their impact on profitability.
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Margin Progression Throughout the Year: Analysts sought clarification on the expected margin progression throughout the year across all segments, given the relatively slow start in the first quarter. This indicated a focus on understanding the trajectory of profitability and the factors influencing it.
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Impact of Farmer Aid Package on Equipment Demand: Analysts asked about the timeframe for farmers to receive the aid package and its potential impact on equipment demand, specifically whether it could accelerate demand in the back half of 2025 or early 2026. This highlighted the importance of understanding the impact of government support on the agricultural equipment market.
Summary
- Financial Performance
Deere & Company reported a significant decline in net sales and revenues for the first quarter of fiscal 2025, down 30% to $8.508 billion and 35% to $6.809 billion for equipment operations, respectively. Net income attributable to Deere was $869 million ($3.19 per diluted share), which included $163 million in discrete tax benefits. Equipment operating margins were just under 8%. While sales were lower than anticipated, management attributed this to timing of shipments and currency translation, maintaining their full-year net income guidance.
- Revenue Drivers
Lower shipment volumes were the primary driver of revenue decline across all segments. This was partly due to planned underproduction to manage inventory levels, particularly in North America large ag and Brazil combines, and a planned production shutdown in North American earthmoving. Currency translation also negatively impacted results, especially in the Production & Precision Ag segment due to the strengthening US dollar. Improving ag fundamentals, government support, and a weakening Brazilian real offered some positive counterpoints, but these did not fully offset the negative impacts.
- Profit Margins and Cost Management
Operating margins varied across segments. Production & Precision Ag showed an 11% operating margin, Small Ag & Turf had a 7.1% margin, and Construction & Forestry had a 3.3% margin. Favorable production costs (reduced material costs and muted overhead) and lower SG&A expenses contributed to cost management success in the Ag & Turf segments. Construction & Forestry experienced higher SG&A and R&D expenses, offsetting some cost savings. Management highlighted their focus on operational efficiency. Full-year margin guidance was adjusted to reflect currency fluctuations.
- Guidance and Outlook
Deere maintained its full-year net income guidance of $5 billion to $5.5 billion despite the weaker-than-expected first quarter. However, sales guidance was revised downward for several segments due to currency headwinds. The effective tax rate guidance was adjusted to 20%-22%. Operating cash flow guidance remained at $4.5 billion to $5.5 billion. The company expects to recover the first-quarter shortfall in shipments over the remainder of the year. Significant risks include macro uncertainty, high interest rates, and potential tariff impacts. Opportunities lie in improving ag fundamentals, government support, and continued technology adoption.
- Strategic Initiatives
Deere emphasized its proactive inventory management strategy, successfully reducing field inventory levels across various product lines and geographies. The company highlighted its focus on technology adoption, particularly in Brazil, with strong sales of Precision Ag Essentials kits and JDLink Boost. Investment in a new technology development center in Brazil was also mentioned. The company continues to prioritize investment in value-added solutions for customers and expanding precision offerings.
- Management Commentary
Management expressed confidence in their ability to manage through the downturn, highlighting proactive inventory management and cost control measures. They acknowledged the challenges posed by macro uncertainty and high interest rates but emphasized the positive impact of government support and improving ag fundamentals in certain regions. The overall tone was cautiously optimistic, emphasizing the company's strategic focus and commitment to its customers.
- Industry and Market Conditions
The company anticipates a decline in large ag equipment industry sales in the US and Canada (approximately 30%), with smaller declines in other regions. High interest rates, macro uncertainty, and elevated used inventory levels are significant headwinds. However, improving ag fundamentals, government support, and positive developments in regions like Brazil and parts of Europe offer some counterbalance. The construction and forestry industry is also facing challenges due to high interest rates and macro uncertainty, but government infrastructure spending and strong road building demand provide some support.
Comparative analysis
Benchmarks (as of 2025-03-28)
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Performance Comparison:
- Deere & Co. (DE) has shown mixed performance compared to the Industrial Select Sector SPDR Fund (XLI). Over shorter periods like Year-To-Date, 1 Week, 1 Month, 3 Months, 6 Months, and 1 Year, DE has outperformed XLI, with outperformance ranging from 0.03% to 15.05%. However, over longer periods of 2 and 3 years, DE has underperformed XLI by -16.27% and -14.42%, respectively.
- The consistency of DE's performance relative to XLI varies depending on the time frame. In the short term, DE has consistently outperformed, while in the long term, it has consistently underperformed.
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Risk and Return Analysis:
- The annualized returns show that DE has outperformed XLI over the past year (16.44% vs. 5.68%). However, XLI has provided higher annualized returns over the 2-year (15.97% vs. 8.72%) and 3-year (9.34% vs. 5.17%) periods.
- Deere & Co. (DE) has generally exhibited higher annualized volatility compared to the Industrial Select Sector SPDR Fund (XLI) throughout the analyzed period. For example, in Q2 2022, DE's volatility ranged from 25.92% to 61.94%, while XLI's ranged from 13.69% to 28.55%.
- Deere & Co. (DE) experienced a maximum drawdown of -33.81% on 07/06/2022, which is significantly larger than the maximum drawdown of -21.64% experienced by the Industrial Select Sector SPDR Fund (XLI) on 09/30/2022. This indicates that DE has a higher risk profile compared to XLI.
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Risk-Adjusted Performance:
- The Sharpe ratios for Deere & Co. (DE) and the Industrial Select Sector SPDR Fund (XLI) varied significantly over the analyzed period. Generally, the Industrial Select Sector SPDR Fund (XLI) exhibited higher Sharpe ratios, indicating better risk-adjusted returns compared to Deere & Co. (DE).
- The beta values for Deere & Co. (DE) and the Industrial Select Sector SPDR Fund (XLI) were generally below 1 throughout the analyzed period, indicating that both were less volatile than the market.
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Overall Assessment:
- Deere & Co. (DE) has shown strong short-term performance, outperforming the Industrial Select Sector SPDR Fund (XLI) in the most recent year. However, its long-term performance has lagged behind XLI. DE exhibits higher volatility and larger drawdowns, indicating a higher risk profile. The Sharpe ratios suggest that XLI has generally offered better risk-adjusted returns.
- A significant trend is the higher volatility of DE compared to XLI, which is consistent across most periods. This suggests that while DE can deliver higher returns in the short term, it comes with increased risk.
Peers Price History(as of 2025-03-28)
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Performance Comparison:
- Deere & Co. (DE) has generally outperformed AGCO Corp. (AGCO) and CNH Industrial NV (CNHI) across most time periods. Over the last 1, 2, and 3 years, DE has shown significantly higher returns compared to its peers. For instance, the 3-year annualized return for DE is 5.17%, while AGCO and CNHI have negative returns of -9.77% and -5.99%, respectively. However, in the short term (e.g., 1 week), DE's performance can sometimes lag behind its peers, as seen in the 1-week return where DE underperformed AGCO.
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Risk and Return Analysis:
- Deere & Co. (DE) has provided higher annualized returns compared to AGCO Corp. (AGCO) and CNH Industrial NV (CNHI) over the 1, 2, and 3-year periods.
- Deere & Co. (DE) has generally exhibited lower annualized volatility compared to AGCO Corp. (AGCO) and CNH Industrial NV (CNHI). For example, in Q1 2025, DE's volatility ranged from 17.91 to 32.03, while AGCO's ranged from 25.45 to 50.47, and CNHI's ranged from 22.53 to 44.96.
- Deere & Co. (DE) has shown a smaller maximum drawdown of -33.81% compared to AGCO's -38.62% and CNHI's -43.69%. This indicates that DE has a more conservative risk profile.
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Risk-Adjusted Performance:
- Deere & Co. (DE) has generally offered a better risk-adjusted return, as indicated by its higher Sharpe ratios compared to AGCO Corp. (AGCO) and CNH Industrial NV (CNHI).
- Deere & Co. (DE)'s beta values are generally below 1, indicating lower sensitivity to market movements compared to AGCO Corp. (AGCO) and CNH Industrial NV (CNHI).
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Overall Assessment:
- Deere & Co. (DE) has demonstrated superior performance, lower volatility, and better risk-adjusted returns compared to AGCO Corp. (AGCO) and CNH Industrial NV (CNHI). The trends indicate that DE has been more stable and resilient, especially in recent periods. These factors suggest that DE may be a more attractive investment option compared to its peers, offering a balance of growth and stability.
Peers Fundamentals(as of 2025-01-31)
- Market Position and Size:
- DE is the largest company in the peer group, with a market capitalization significantly exceeding that of AGCO and CNHI. This size advantage is reflected in DE's revenue, EBITDA, and net income, which are all substantially higher than its peers.
- Profitability and Efficiency:
- DE exhibits significantly higher profitability than its peers and the industry average, as evidenced by its superior Gross Profit Margin, EBITDA Margin, and Net Profit Margin. This strong profitability is likely driven by DE's larger scale, brand recognition, and market share in the agricultural equipment industry.
- DE demonstrates superior efficiency in generating returns compared to its peers and the industry average, as evidenced by its high Return on Average Assets, Return on Average Total Equity, Return on Average Total Capital, and Return On Average Invested Capital. These strong returns on capital suggest that DE is effectively utilizing its assets and investments to generate profits.
- Financial Health and Stability:
- DE's liquidity and solvency metrics present a mixed picture. While its Current Ratio and Quick Ratio are lower than its peers and the industry average, its Total Debt to Total Equity Ratio and Debt / EBITDA are significantly higher, suggesting that DE has a higher level of debt compared to its peers and the industry, which could pose a risk to its financial stability.
- Valuation and Market Perception:
- DE's valuation metrics are generally higher than its peers and the industry average, suggesting that the market is willing to pay a premium for DE's earnings and assets, likely due to its strong brand, market share, and profitability.
- Cash Flow and Capital Management:
- DE generates significantly more cash flow than its peers, considering their respective market caps. This strong cash flow generation capacity is a testament to DE's efficient operations and ability to generate profits.
- Growth and Future Prospects:
- DE's growth trends show a mixed picture compared to its peers. While DE has consistently outperformed the peer group average in terms of revenue, EBITDA, net income, and basic earnings per share over the past 5 years, its growth rates have been more volatile than the peer group average.
- DE's 3-year CAGR for revenue, EBITDA, net income, and basic earnings per share is lower than its 5-year CAGR, indicating a deceleration in growth over the past 3 years. This deceleration is more pronounced for net income and basic earnings per share, suggesting that DE's profitability growth may be slowing down.
- DE's growth is primarily concentrated in revenue, EBITDA, and net income, while its free cash flow growth has been more volatile. This suggests that DE's growth is driven by its core business operations, but its ability to convert profits into free cash flow may be less consistent.
- DE's growth profile is characterized by a combination of strong revenue growth and relatively stable profitability. However, the deceleration in growth rates and the volatility in free cash flow growth raise concerns about the sustainability of DE's growth trajectory.
- Potential for Investment:
- DE presents an attractive investment opportunity due to its strong profitability, efficient returns generation, and robust cash flow generation. However, investors should be aware of its high debt levels and decelerating growth rates, which could potentially impact its future performance.
- Key Risks and Considerations:
- DE's high debt levels could pose a risk to its financial stability, particularly if interest rates rise or economic conditions deteriorate.
- The deceleration in DE's growth rates, particularly for net income and basic earnings per share, could indicate a weakening of its competitive position or a saturation of the agricultural equipment market.
- The volatility in DE's free cash flow growth raises concerns about its ability to consistently convert profits into cash flow, which could impact its ability to invest in future growth or return capital to shareholders.
- Overall Assessment:
- DE is a financially strong company with a dominant market position in the agricultural equipment industry. Its high profitability, efficient returns generation, and robust cash flow generation are key strengths. However, its high debt levels and decelerating growth rates pose potential risks to its future performance. Investors should carefully consider these factors before making an investment decision.