Company Reports

Deere reported 5% growth in sales to $13.4 billion and a 1% decline in EPS to $6.55. Its 16% growth in small ag & turf and 29% growth in construction & forestry were offset by a 14% decline in production & precision ag.

Deere reported 18% growth in its industrial businesses in the first quarter, with broad-based gains across the board, including 3% in core Precision Ag, 24% in Small Ag, and 34% in Construction. Tariffs weighed approximately $250 million in the quarter, but profitability was strong.

Deere is one of the world’s leading providers of machinery serving agricultural, construction, and other industrial end markets. With significant exposure to and dominant share in agricultural end markets (as much as two thirds of operating profits), the company is widely regarded as a quintessential “cyclical.” Since 2012, the company has increasingly invested in “connecting” its machines to GPS and other technology architecture to boost their performance in the field. In 2020, management launched its “Smart Industrial” operating model, which included a reorganization of its reporting segments to focus on customer production processes and where Deere can enhance efficiency via technological innovation. In 2022, the company introduced its LEAP ambitions, a set of four-year plans to incorporate more connectedness in its installed base as well as enhancing sustainability initiatives via increased use of recycled materials and reducing its carbon footprint. Specifically, management claims that these ambitions include a $150 billion incremental increase to Deere’s total addressable market. The company is well on its way to achieving its 2030 objectives, which include 10% revenue CAGR and 20% midcycle operating margins.

Deere reported equipment sales down 13% in fiscal 2025 and net income down nearly 30%. However, the company posted year-over-year growth in all its segments as it finally lapped easier comparables from drastically reduced production levels to clear out inventories.

Deere is one of the world’s leading providers of machinery serving agricultural, construction, and other industrial end markets. With significant exposure to and dominant share in agricultural end markets (as much as two thirds of operating profits), the company is widely regarded as a quintessential “cyclical.” Since 2012, the company has increasingly invested in “connecting” its machines to GPS and other technology architecture to boost their performance in the field. In 2020, management launched its “Smart Industrial” operating model, which included a reorganization of its reporting segments to focus on customer production processes and where Deere can enhance efficiency via technological innovation. In 2022, the company introduced its LEAP ambitions, a set of four-year plans to incorporate more connectedness in its installed base as well as enhancing sustainability initiatives via increased use of recycled materials and reducing its carbon footprint. Specifically, management claims that these ambitions include a $150 billion incremental increase to Deere’s total addressable market. The company is well on its way to achieving its objectives over the 2026 and 2030 timeframes, which are essentially about increasing the attach rate of technology sales to its equipment.

Deere earnings stayed under pressure in the fiscal third quarter with sales down 9% and EPS down 24%. Management tightened 2025 guidance. Despite some moving parts, our net income target is virtually unchanged and closer to the midpoint of the revised guidance versus slightly toward the lower end.

Deere is one of the world’s leading providers of machinery serving agricultural, construction, and other industrial end markets. With significant exposure to and dominant share in agricultural end markets (as much as two thirds of operating profits), the company is widely regarded as a quintessential “cyclical.” Since 2012, the company has increasingly invested in “connecting” its machines to GPS and other technology architecture to boost their performance in the field. In 2020, management launched its “Smart Industrial” operating model, which included a reorganization of its reporting segments to focus on customer production processes and where Deere can enhance efficiency via technological innovation. In 2022, the company introduced its LEAP ambitions, a set of four-year plans to incorporate more connectedness in its installed base as well as enhancing sustainability initiatives via increased use of recycled materials and reducing its carbon footprint. Specifically, management claims that these ambitions include a $150 billion incremental increase to Deere’s total addressable market. The company is well on its way to achieving its objectives over the 2026 and 2030 timeframes, which are essentially about increasing the attach rate of technology sales to its equipment.

Deere reported impressive fiscal second-quarter results despite challenges in several end markets. Sales of $12.7 billion declined 16% year over year, and net income of $1.8 billion declined 24% year over year. The core production & precision agriculture, or PPA, business was down 20% on the top line and 30% at the operating profit level. While Deere’s financial reporting calendar isn’t identical to its peers, CNH and Agco, the performance in this segment appeared optically better than the peers, despite Deere claiming its most recent retail sales data was down harder than the industry. Small agriculture & turf, or SAT, sales were down 6%, and operating profit was essentially flat; and construction & forestry, or CF, sales were down 23%, and operating profit declined 43%. The financial services subsidiary delivered flat net income.

Deere is one of the world’s leading providers of machinery serving agricultural, construction, and other industrial end markets. With significant exposure to and dominant share in agricultural end markets (as much as two thirds of operating profits), the company is widely regarded as a quintessential “cyclical.” Since 2012, the company has increasingly invested in “connecting” its machines to GPS and other technology architecture to boost their performance in the field. In 2020, management launched its “Smart Industrial” operating model, which included a reorganization of its reporting segments to focus on customer production processes and where Deere can enhance efficiency via technological innovation. In 2022, the company introduced its LEAP ambitions, a set of four-year plans to incorporate more connectedness in its installed base as well as enhancing sustainability initiatives via increased use of recycled materials and reducing its carbon footprint. Specifically, management claims that these ambitions include a $150 billion incremental increase to Deere’s total addressable market. The company is well on its way to achieving its objectives over the 2026 and 2030 timeframes, which are essentially about increasing the attach rate of technology sales to its equipment.

Deere is one of the world’s leading providers of machinery serving agricultural, construction, and other industrial end markets. With significant exposure to and dominant share in agricultural end markets (as much as two thirds of operating profits), the company is widely regarded as a quintessential “cyclical.” Since 2012, the company has increasingly invested in “connecting” its machines to GPS and other technology architecture to boost their performance in the field. In 2020, management launched its “Smart Industrial” operating model, which included a reorganization of its reporting segments to focus on customer production processes and where Deere can enhance efficiency via technological innovation. In 2022, the company introduced its LEAP ambitions, a set of four-year plans to incorporate more connectedness in its installed base as well as enhancing sustainability initiatives via increased use of recycled materials and reducing its carbon footprint. Specifically, management claims that these ambitions include a $150 billion incremental increase to Deere’s total addressable market. The company is well on its way to achieving its objectives over the 2026 and 2030 timeframes, which are essentially about increasing the attach rate of technology sales to its equipment.

Deere reported weak results for the first quarter, but this was not surprising given broadly telegraphed challenges facing most of its end markets. Sales and net income were down 30% and 50%, respectively, at a group level. The core Production & Precision Agriculture business struggled the most, down nearly 40% and 70% in terms of sales and operating profit. Small Agriculture & Turf declined nearly 30% and 60%, and Construction & Forestry declined approximately 40% and 90%.

After taking a fresh look at Deere & Co, the global leader in agricultural machinery, we’ve raised our fair value estimate to $501 per share from $355 to reflect our more constructive view on the company’s margin-accretive technological innovations. This will likely allow the firm to achieve target through-cycle margins of 20%, having already demonstrated some 700 basis points of structural improvement versus prior cycles. Furthermore, 2025 likely represents the trough of the agriculture cycle. We’re maintaining our wide economic moat rating as well as our Exemplary Capital Allocation Rating given management’s focus on maintainably higher through-cycle returns. This is in addition to generous shareholder remuneration via its progressive dividend and significant share repurchases.

Deere is one of the world’s leading providers of machinery serving agricultural, construction, and other industrial end markets. With significant exposure to and dominant share in agricultural end markets (as much as two thirds of operating profits), the company is widely regarded as a quintessential “cyclical.” Since 2012, the company has increasingly invested in “connecting” its machines to GPS and other technology architecture to boost their performance in the field. In 2020, management launched its “Smart Industrial” operating model, which included a reorganization of its reporting segments to focus on customer production processes and where Deere can enhance efficiency via technological innovation. In 2022, the company introduced its LEAP ambitions, a set of four-year plans to incorporate more connectedness in its installed base as well as enhancing sustainability initiatives via increased use of recycled materials and reducing its carbon footprint. Specifically, management claims that these ambitions include a $150 billion incremental increase to Deere’s total addressable market. The company is well on its way to achieving its objectives over the 2026 and 2030 timeframes, which are essentially about increasing the attach rate of technology sales to its equipment.

Deere offers customers an extensive portfolio of agriculture and construction equipment. We think it will continue to be the leader in the agriculture industry and one of the top players in construction. For over a century, the company has been the pre-eminent manufacturer of mission-critical agricultural equipment, which has led to its leading brand recognition. Deere’s strong brand is underpinned by its high-quality, extremely durable, and efficient products. Customers in developed markets also value Deere’s ability to reduce their total cost of ownership through productivity and other efficiency enhancements.

Deere's global sales ended fiscal 2024 down nearly 19% from its blockbuster 2023, and though equipment operating profit fell almost 30%, it maintained 20% operating margins. Deere management anticipates another slow year in 2025 and is taking steps to curtail production until demand picks up.

Deere offers customers an extensive portfolio of agriculture and construction equipment. We think it will continue to be the leader in the agriculture industry and one of the top players in construction. For over a century, the company has been the pre-eminent manufacturer of mission-critical agricultural equipment, which has led to its leading brand recognition. Deere’s strong brand is underpinned by its high-quality, extremely durable, and efficient products. Customers in developed markets also value Deere’s ability to reduce their total cost of ownership through productivity and other efficiency enhancements.

Announcing third-quarter results, management again lowered its 2024 sales expectations, this time in the construction and forestry segment. If the company's full-year projections come to fruition, at the current pace Deere's fourth quarter will not be pretty, as we see accelerating declines in the quarter ending in October. We adjusted our full-year forecast for reduced sales in construction and forestry, which offset time value of money and reduced our fair value estimate by $1 to $340.

Deere offers customers an extensive portfolio of agriculture and construction equipment. We think it will continue to be the leader in the agriculture industry and one of the top players in construction. For over a century, the company has been the pre-eminent manufacturer of mission-critical agricultural equipment, which has led to its leading brand recognition. Deere’s strong brand is underpinned by its high-quality, extremely durable, and efficient products. Customers in developed markets also value Deere’s ability to reduce their total cost of ownership through productivity and other efficiency enhancements.

Deere’s stock was down approximately 4% in intraday trading, following fiscal second-quarter earnings. We think the market reacted negatively to lower 2024 guidance. Management’s update led us to lower our fair value estimate by 1.5% to $339 per share, which is down from $344 previously. Our valuation reflects the lower demand environment across Deere’s segments.

Deere offers customers an extensive portfolio of agriculture and construction products. We think it will continue to be the leader in the agriculture industry and one of the top players in construction. For over a century, the company has been the pre-eminent manufacturer of mission-critical agricultural equipment, which has led to its place as one of the world’s most valuable brands. Deere’s strong brand is underpinned by its high-quality, extremely durable, and efficient products. Customers in developed markets also value Deere’s ability to reduce the total cost of ownership.