Wide-Moat Deere Harvests Greater Profits
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.
United States