Deere & Company (DE 1.74%), a leading manufacturer of agricultural, construction, and forestry machinery, released its fiscal 2024 second-quarter financial results on May 16. For the period, which ended April 28, net income fell 17% year over year to $2.4 billion, while revenue dropped 12% to $15.2 billion. Despite these challenges, the company reiterated its commitment to its strategic initiatives and technology investments.
| Metric | Fiscal Q2 2024 | Fiscal Q2 2023 | % Change |
|---|---|---|---|
| Revenue | $15.2 billion | $17.4 billion | (12.4%) |
| Net Income | $2.4 billion | $2.9 billion | (17.1%) |
| Diluted EPS | $8.53 | $9.65 | (11.6%) |
| Production and precision agriculture net sales | $6.6 billion | $7.8 billion | (15.9%) |
| Small agriculture and turf net sales | $3.2 billion | $4.1 billion | (23.2%) |
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Source: Company numbers from company. Fiscal Q2 2023 ended April 30, 2023. |
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About Deere & Company
Deere & Company, also known as John Deere, is renowned for its agricultural, construction, and forestry machinery. The company operates through four main segments: production and precision agriculture; small agriculture and turf; construction and forestry; and financial services.
Recently, the company has been concentrating on integrating technology more heavily into its machines to improve productivity. This has included investments in digital capabilities, autonomous machinery, and sustainable technology solutions.
Quarterly highlights
During its fiscal second quarter, Deere & Company faced considerable headwinds as global demand fell for its agricultural and turf equipment. Net sales for its production and precision agriculture segment declined 16% to $6.6 billion, and operating profits fell 24% to $1.7 billion. This was primarily due to lower shipment volumes and higher production costs, which reduced the segment's operating margin from 27.7% to 25.1%.
The small agriculture and turf segment experienced a more severe decline, with net sales plummeting 23% to $3.2 billion. Operating profit in this segment dropped 33% to $571 million, and operating margins decreased from 20.5% to 17.9%, likewise due to lower shipment volumes and increased costs.
In the construction and forestry segment, net sales fell 7% to $3.8 billion, while operating profit decreased by 20% to $668 million. Operating margins also dropped from 20.4% to 17.4%. The segment was affected by lower sales volumes and higher selling, administrative, and general expenses, as well as increased research and development costs. But the company described conditions in the construction industry specifically as "stable."
Despite the challenges, Deere continued to advance its technological initiatives. It invested in technologies like ExactShot and FurrowVision, and introduced innovations like the Autonomous 8R Tillage Tractor and See & Spray Ultimate technology. Additionally, Deere has been enhancing connectivity through real-time data solutions and partnerships, including utilizing SpaceX satellite connectivity to improve machine connectivity.
One-time events during the quarter included proactive inventory management actions, particularly in Europe and Brazil, to better align production with market demand. These actions temporarily impacted Deere's financials, but are intended to position the company better for future demand fluctuations.
Looking ahead
Management cut its full-year net income guidance to approximately $7 billion, down from the previous range of $7.5 billion to $7.75 billion. This adjustment reflects the ongoing market challenges and the company's adjusted views on future demand.
Investors should keep an eye on future developments in Deere's advanced machinery and connectivity solutions, which could play a significant role for the company as it attempts to navigate through complex economic conditions.
