Q4 2024 Earnings Summary
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | -28% (from $15,411M to $11,144M ) | The decline stemmed primarily from lower shipment volumes in core segments amid higher interest rates and softening demand; these conditions offset modest price realization gains. Forward-looking, management anticipates continued caution from customers and ongoing cost pressures. |
Production & Precision Ag | -38% (from $6,964M to $4,305M ) | The steep drop resulted from reduced volumes in the U.S., Europe, and Brazil owing to lower commodity prices and interest-rate-driven purchasing delays. Company-specific initiatives to streamline production could help margins longer term, but near-term demand remains subdued. |
Small Agriculture & Turf | -25% (from $3,095M to $2,306M ) | Uncertainty in commodity prices, combined with tighter credit conditions, curbed equipment purchases, driving volumes lower. Price realization partly offset these effects. Into the future, management sees modest improvements if input costs normalize and financing conditions stabilize. |
Construction & Forestry | -29% (from $3,741M to $2,665M ) | Slowing construction activity (particularly in housing starts and commercial real estate) led to fewer orders. Higher costs and inventory rightsizing efforts by rental fleets contributed to the downturn. Continued caution in construction markets may temper recovery until interest rates ease. |
Financial Services | +13% (from $1,346M to $1,522M ) | Growth was propelled by higher average financing rates and portfolio balances, though rising credit risk and less favorable spreads remain challenges. Longer term, the segment’s profitability could be affected by delinquency trends and broader macroeconomic impacts. |
Net Income | -47% (from $2,369M to $1,245M ) | Lower overall sales volumes, heightened production costs, and one-time expenses (including separation programs) pressured margins. Although the company benefited from price realization, those gains were insufficient to offset the broad demand slowdown. Heading forward, cautious inventory management and stable pricing could help mitigate profit erosion. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Net Income | FY 2025 | no prior guidance | $5.0B to $5.5B | no prior guidance |
EPS | FY 2025 | no prior guidance | $19 | no prior guidance |
Effective Tax Rate | FY 2025 | no prior guidance | 23% to 25% | no prior guidance |
Operating Cash Flow from Equipment Ops | FY 2025 | no prior guidance | $4.5B to $5.5B | no prior guidance |
Worldwide Financial Services Net Income | FY 2025 | no prior guidance | $750M | no prior guidance |
Operating Margin for Equipment Operations | FY 2025 | no prior guidance | Full-year margins expected to be 300–400 bps lower in Q1 compared to the full-year guide | no prior guidance |
Production Costs | FY 2025 | no prior guidance | Expected to be favorable | no prior guidance |
Price Realization | FY 2025 | no prior guidance | Net price increase of ~1% for Production & Precision Ag; list price increases of 2%–3% | no prior guidance |
Large Ag Equipment (U.S. & Canada) | FY 2025 | no prior guidance | Industry sales expected to decline by ~30% | no prior guidance |
Small Ag & Turf (U.S. & Canada) | FY 2025 | no prior guidance | Industry demand estimated to decline by ~10% | no prior guidance |
Construction & Forestry Market Demand | FY 2025 | no prior guidance | Expected to decline due to uncertainty, with significant underproduction planned in the first half of the year | no prior guidance |
Brazil Operations | FY 2025 | no prior guidance | Double-digit increase in shipments year-over-year in most equipment categories, except combines | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Net Income (USD) | FY 2024 | ~$7B | $7.10B (sum of Q1, Q2, Q3, Q4) | Beat |
Production & Precision Ag segment net sales (yoy) | Q4 2024 yoy | Down 20–25% | Down 38% (from 6,964To 4,305) | Missed |
Small Ag & Turf segment net sales (yoy) | Q4 2024 yoy | Down 20–25% | Down 25.5% (from 3,095To 2,306) | Missed |
Construction & Forestry segment net sales (yoy) | Q4 2024 yoy | Down 10–15% | Down 28.8% (from 3,741To 2,665) | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Margin expansion and profitability | Highlighted in Q1, Q2, and Q4 with stronger margins; Q3 cited margin pressures but reaffirmed disciplined cost control. | Achieved 13.1% margins in Q4 and 18.2% full-year, emphasizing structural improvements enabling resilience. Expects to maintain higher margins even at trough levels in 2025. | Consistent focus on structural profitability, with Q3 pressures offset by long-term improvements. |
Inventory management and production alignment | Repeated in Q1, Q2, Q3 with proactive actions to align production, reduce inventory, and support margins. | Significant underproduction in certain segments (e.g., combines, earthmoving) to calibrate field inventories. Also worked with dealers to better position retail/used. | Consistent strategy, refining schedules to match demand and maintain lean inventories. |
Demand environment for agricultural equipment | Q1 showed optimism due to strong farmer profitability; Q2 and Q3 noted broader softening caused by high interest rates and lower crop prices. | 30% decline in large ag expected in U.S./Canada; softening in Europe and Brazil. Dairy/livestock remain profitable niches. | Worsening from cautious optimism in Q1 to clearer softening in later quarters. |
Adoption of advanced technologies | Q1, Q2, Q3 consistently stressed importance of precision ag (e.g., See & Spray, satellite connectivity) with rising acre engagement. | 75% of combine EOP orders opted for high-level automation; over 1,000 See & Spray orders for 2025. | Consistently growing, with new Q4 data showing strong uptake. |
Regional performance (Brazil) | Cited as a growth region in Q1 and Q2, though market softened in Q3 as well. Strong technology adoption and sugarcane segment highlighted. | Significant inventory reduction; expects double-digit growth in shipments (excl. combines) in 2025. Positive price outlook after negative pricing in 2024. | Steadfast focus on Brazil; still a growth market despite short-term softening. |
Policy changes under new administration | Only Q4 references were found; no mentions in Q1, Q2, Q3. | Mentioned uncertainty but too early to assess full impacts. Monitoring developments. | Not reiterated after Q4 mention. |
CH950 sugarcane harvester | Q1 highlighted its 2-row design and fuel efficiency advantages in Brazil. Not mentioned in Q2 or Q3. | No Q4 mention. | No longer discussed post-Q1. |
Cash return to shareholders | Q2 mentioned ~$1.5B returned via dividends/buybacks. Q1 disclosed $1.7B. Not restated with the same emphasis in Q3. | Returned over $5.6B in FY24. | Less emphasis after Q2’s focus, though Q4 shows a large annual total. |
Harvest automation & See & Spray orders | No mentions in Q1, Q2, or Q3 for these specific figures. | Up to 20% productivity gains from automation settings; 1,000+ See & Spray orders for 2025. | New in Q4, signaling strong demand for high-tech solutions. |
415 million engaged acres | Introduced in Q2 with 415 million engaged acres globally. No direct Q3 mention. | Not specifically cited in Q4; new total of 455 million acres mentioned. | Expanded from 415M to 455M. |
Major new product launch PPA | Q1 highlighted a significant launch affecting Production & Precision Ag. Not discussed in Q2 or Q3. | Q4 references new product introductions for MY25, but no specific mention of a single major launch akin to Q1’s statement. | Mention in Q1; no detailed follow-up. |
Margins strong, Q3 pricing caution | Q3 discussed competitive pressures in construction, lower net pricing in some segments. | Q4 margin still robust; recognized potential competition and volume dips. | Cautious tone remains, though structural margins hold. |
Demand outlook softening | Q1 saw modest caution, Q2 and Q3 showed clearer softening in NA/EU/Brazil. | Q4 expects further ag decline in 2025 amid high rates, global supply. | Continues to worsen from Q1 optimism to Q4 downdraft. |
Structural margin improvements | Priority in Q1, Q2, Q3 calls, fueling stronger profitability across cycles. | 700 bps improvement since 2020; aiming to surpass past peak margins even at trough in 2025. | High-impact initiative remains critical to long-term results. |
Continued growth in advanced tech | Emphasized in all periods (Q1–Q3) as essential to future performance (Precision Ag Essentials, connectivity, ROI). | See & Spray expanding acreage; pay-per-use models drive adoption. | Key driver of Deere’s strategy, with accelerating adoption in Q4. |
Potential policy & macro shifts | Only generalized macro themes (interest rates, geopolitical tensions) in Q2/Q3, not specific policy changes. | Monitors new policies; ~75% of equipment for U.S. is built domestically, providing partial insulation. | Mentioned in Q4, broader macro concerns persistent. |
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Decremental Margins and Pricing Power
Q: Can you maintain positive pricing in North America despite sales decline?
A: Management expects to maintain positive pricing in North America even with sales down 30%. Despite challenges, they are confident they can deliver positive price due to tight new inventory levels and increasing incentives targeted at reducing used inventory. They also expect positive pricing in Brazil to bounce back in 2025. -
Guidance Dynamics and Underproduction
Q: Is the underproduction ceasing later in the year, leading to growth?
A: Management anticipates greater year-over-year declines in the first half, particularly in construction and forestry due to underproduction. Comparisons should improve progressively, possibly returning to growth in the third quarter as year-over-year comps get better when compared to the back half of 2024. -
Pool Funds and Used Inventory Reduction
Q: Can you expand on the pool funds program and its impact on inventory?
A: The pool funds program provides stability in the used market during downturns. Dealers have been deploying pool funds to reduce used inventory, leading to a decline in pool fund balances over the year. Management plans to continue supporting reductions in used inventory with additional incentives and expects higher incentive rates in 2025, which are included in their pricing guidance. -
Used Equipment Inventory Levels
Q: How do you expect dealer used inventory balances to progress?
A: Management is optimistic about reducing used equipment inventory levels over the next few quarters. They aim to utilize opportunities like year-end tax buying and lower production levels to drive reductions. They are seeing farmers return to the market for late-model used equipment needed for expanding high-speed planting. -
Construction Pricing and Market Trends
Q: What drives the positive price guide in construction amidst softness?
A: Despite a competitive pricing environment in construction and forestry, management expects to achieve positive price realization for the year. Stability in segments like road building, which comprises 35% to 40% of the business, contributes positively. They see no significant change in the price cadence throughout the year. -
Impact of New Administration Policies
Q: How might the new administration impact your business and farmers?
A: It's too early to determine the exact impact of the new administration's policies. Management is engaging and will monitor developments affecting customers, suppliers, and operations. They feel well-positioned due to reliance on highly skilled U.S. employees, with over 75% of products sold in the U.S. assembled domestically, and being a net exporter in the Ag and Turf division.