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Deere & Company (DE) 2025 Investor Day June 10, 2025 01:00 PM ET Speaker0 Hello, and good afternoon to everyone here in person at our research and development center in Andayatuba, Brazil. And a good morning, good afternoon, and good evening to all those joining us live via webcast around the world. Welcome to John Deere's Investor Day Brazil. My name is Josh Beale, and I'm the director of investor relations for Deere and Company. We are so excited to have you here today, and thank you for taking the time t ...

Core Insights - John Deere employees have set a new record by volunteering over 340,000 hours in 2024, marking a 31% increase from the previous year, and have been recognized for the fourth consecutive year in The Civic 50, which honors the most community-minded companies in the U.S. [2][5] Community Contributions - The John Deere Foundation has awarded over $400 million to those in need since its inception in 1948, with $61.7 million contributed in 2024 alone to nonprofit organizations globally [5] - In 2024, the foundation's investments supported more than 115,000 youth, providing over 4 million hours of high-quality STEM education experiences facilitated by 600 John Deere employee mentors [5] Corporate Social Responsibility - The recognition from Points of Light reflects John Deere's commitment to trust-based philanthropy and unrestricted giving, showcasing the company's efforts to enhance community well-being and employee engagement [3][5] - Jennifer Sirangelo, president and CEO of Points of Light, emphasized that John Deere's initiatives serve as a model for other companies aiming to integrate social impact into their workforce [3]

Core Insights - John Deere will hold its Brazil Investor Day on June 10, 2025, at 12:00 p.m. central time, focusing on the agriculture sector's evolution and the company's regional presence [1] - The event will highlight 25 years of strategic investments and future opportunities in Brazil [1] Company Overview - Deere & Company is a global leader in providing advanced products, technology, and services for agriculture and construction sectors [3] - The company aims to meet the increasing global demand for food, fuel, shelter, and infrastructure [3]

Financial Performance - Net sales and revenues for the second quarter of 2025 decreased by 16% to $12,763 million compared to $15,235 million in 2024, and year-to-date sales decreased by 22% to $21,272 million from $27,420 million[107]. - Net income attributable to Deere & Company for the second quarter of 2025 was $1,804 million, a decrease of 24% from $2,370 million in 2024, and year-to-date net income decreased by 35% to $2,673 million from $4,121 million[107]. - Total consolidated net income attributable to Deere & Company for the six months ended April 27, 2025, was $2,673 million, down from $4,121 million in the same period of 2024, representing a decrease of about 35%[156]. - Net income for the first six months of 2025 was $2,667 million, a decrease of 35.1% compared to $4,116 million in 2024[161]. Segment Performance - Production and Precision Agriculture segment net sales decreased by 21% to $5,230 million in the second quarter of 2025, with operating profit down 30% to $1,148 million[111]. - Small Agriculture and Turf segment net sales decreased by 6% to $2,994 million in the second quarter of 2025, with operating profit slightly up by 1% to $574 million[116]. - Construction and Forestry net sales decreased by 23% to $2,947 million for the three months ended April 27, 2025, and by 30% to $4,941 million for the six months ended April 27, 2025, compared to the same periods in 2024[121]. - Operating profit for Construction and Forestry dropped 43% to $379 million for the three months ended April 27, 2025, and 64% to $444 million for the six months ended April 27, 2025, primarily due to lower shipment volumes and unfavorable price realization[121]. Cost and Expenses - The cost of sales to net sales ratio increased to 68.1% in the second quarter of 2025 from 67.3% in 2024, primarily due to higher overhead costs and tariffs[108]. - The cost of sales for equipment operations was $7,609 million in Q2 2025, compared to $9,157 million in Q2 2024, reflecting a reduction of approximately 17%[154]. - Total costs and expenses for the six months ended April 27, 2025, were $18,040 million, down from $22,087 million in the same period of 2024, a decrease of about 18%[156]. Cash Flow and Financing - Cash provided by operating activities was $568 million for the first six months of 2025, down from $944 million in the same period last year[135]. - The company forecasts lower operating cash flows from equipment operations in 2025 compared to 2024, driven by a decrease in net income adjusted for non-cash provisions[129]. - Cash flows from operating activities decreased to $568 million in 2025 from $944 million in 2024, reflecting a decline of 39.8%[161]. - Net cash used for investing activities was $779 million in 2025, compared to a cash outflow of $1,670 million in 2024, indicating a significant improvement[161]. - Net cash provided by financing activities was $(821) million in 2025, a decrease from $(1,162) million in 2024, showing a reduction in cash outflow[161]. Market Outlook - The company expects agriculture and turf equipment sales volumes for the remainder of 2025 to be lower than the prior year due to reduced demand driven by high interest rates and market uncertainty[93]. - The construction equipment industry sales are forecasted to decline in the U.S. and Canada from 2024 levels, influenced by macroeconomic uncertainty and high mortgage rates[105]. - The company anticipates continued challenges in the agricultural market due to lower sales volumes, higher sales incentives, and elevated receivable write-offs in 2025[99]. - The company continues to face challenges from higher interest rates, supply chain disruptions, and geopolitical instability affecting its operations and market demand[149]. Research and Development - Research and development expenses for the first six months of 2025 were $1,075 million, a decrease of 2% from $1,098 million in 2024, reflecting continued investment in technology solutions[108]. - Research and development expenses for equipment operations were $549 million in Q2 2025, slightly down from $565 million in Q2 2024[154]. Balance Sheet - Total assets for Deere & Company reached $106.303 billion as of April 2025, compared to $107.320 billion in October 2024, reflecting a decrease of approximately 0.94%[159]. - Total liabilities decreased to $81.925 billion in April 2025 from $84.395 billion in October 2024, a reduction of approximately 2.8%[159]. - Stockholders' equity rose to $24.287 billion in April 2025, up from $22.836 billion in October 2024, indicating an increase of about 6.3%[159]. - The ratio of interest-bearing debt to stockholder's equity was 8.7 to 1 as of April 27, 2025, compared to 8.1 to 1 a year earlier[131]. - The company has access to $11.9 billion in worldwide lines of credit, with $4,866 million unused as of April 27, 2025[143]. Inventory and Borrowings - Inventories increased by $777 million during the first six months of 2025, primarily due to seasonal increases, but decreased by $573 million compared to a year ago[138]. - Inventories stood at $7.870 billion in April 2025, compared to $7.093 billion in October 2024, marking an increase of about 10.9%[159]. - The company's short-term borrowings decreased to $911 million in April 2025 from $1.055 billion in October 2024, a decline of about 13.6%[159]. Stockholder Returns - The company repurchased common stock amounting to $838 million in 2025, down from $2,422 million in 2024, indicating a reduction of 65.4%[161]. - Dividends paid increased to $1,827 million in 2025 from $1,888 million in 2024, a decrease of 3.2%[161].

Core Viewpoint - Deere & Company has seen its shares reach an all-time high, reflecting strong performance despite a recent decline in net income, indicating investor confidence in the company's long-term growth potential [1][4]. Financial Performance - For the second quarter of fiscal 2025, Deere reported a net income of $1.8 billion, down 24% year-over-year and 37% compared to the same quarter in 2023 [4]. - The company's trailing-12-month earnings are still more than double pre-pandemic highs, demonstrating resilience in earnings growth [7]. - Deere updated its full-year fiscal 2025 net income projection to a range of $4.75 billion to $5.5 billion, reflecting a $500 million pretax impact from current tariff levels [8]. Market Dynamics - Deere operates in a cyclical industry, with earnings influenced by factors such as crop prices and economic growth, which can lead to fluctuations in customer spending [5]. - The industry outlook for fiscal 2025 anticipates a 30% decline in large agriculture in the U.S. and Canada, with smaller declines in other regions [11]. Segment Performance - Net sales for the second quarter were reported as follows: Production & Precision Agriculture at $5.23 billion, Small Agriculture & Turf at $2.99 billion, and Construction & Forestry at $2.95 billion [10]. - The operating margins for these segments were 22%, 19.2%, and 12.9% respectively, with Construction & Forestry experiencing significant margin pressure due to lower shipment volumes [10]. Shareholder Value - Deere has a low payout ratio of 26%, indicating strong free cash flow generation, which supports dividend payments and stock buybacks [14]. - The company raised its dividend by 10.2% to $1.62 per share per quarter, reflecting a commitment to returning value to shareholders [14]. - Over the past five years, Deere's dividend has more than doubled, and its share count has decreased by over 13%, enhancing earnings per share growth [15][16]. Strategic Positioning - Despite economic slowdowns, Deere remains a high-margin business with substantial free cash flow, allowing for reinvestment and shareholder returns [12]. - The company is well-insulated from tariff impacts due to its significant domestic manufacturing, positioning it favorably for future growth [18]. - Deere is viewed as a foundational stock for long-term investment, capable of supporting operating expenses and capital return programs [19].

Group 1 - Deere & Company has acquired Sentera, a provider of remote imagery solutions for agriculture, to enhance its technology offerings and support farmers [1] - The integration of Sentera's imagery capabilities with Deere's Operations Center will enable farmers to make data-driven decisions that improve profitability, efficiency, and sustainability [2] - Sentera's cameras, compatible with major drone systems, allow for the assessment of plant health and identification of stressors, while also providing customized herbicide prescriptions through advanced sprayer technology [3][4] Group 2 - Deere is focused on expanding its product offerings and is well-positioned for long-term growth through investments in new products and advanced technologies [5] - The company plans to invest $20 billion in the United States over the next decade to develop cutting-edge technologies and enhance manufacturing capabilities [6] - Deere's shares have increased by 38.1% over the past year, outperforming the industry's growth of 32.3% [7]

Core Insights - John Deere has announced the acquisition of Sentera, enhancing its technology offerings in agriculture and providing farmers with advanced tools for data-driven decision-making to improve profitability, efficiency, and sustainability [1] Company Overview - John Deere aims to integrate Sentera's advanced remote imagery solutions into its existing suite of tools, allowing farmers to gather and analyze agronomic data effectively [2] - Sentera's technology includes high-resolution cameras compatible with major drone platforms, enabling efficient data capture for assessing plant health and identifying stressors [2][3] Technology Integration - The integration of Sentera's capabilities with the John Deere Operations Center will facilitate real-time data collection and insights, enhancing decision-making throughout the growing season [2] - Sentera's technology allows for the creation of weed maps, which provide targeted prescriptions for herbicide application, minimizing waste and optimizing resource use [3][4] Market Position - Sentera will continue to supply its cameras to drone manufacturers and sell directly to farmers and agronomists, while the John Deere Operations Center will remain open to other drone imagery providers, ensuring a variety of solutions for customers [5] - The collaboration is expected to support a broader range of customers in adopting precision agriculture technologies, complementing existing advanced solutions like See & Spray™ [4] Leadership Perspective - The CEO of Sentera expressed confidence that the partnership with John Deere will enhance access to precision agriculture technologies, emphasizing the importance of trusted relationships and measurable insights [6]

Core Insights - Deere & Company is expected to see its stock price rise by 20% or more in 2025, driven by strong Q2 results, positive guidance, and robust capital returns [1] - Analysts have responded positively, with 20 analysts tracking the stock, nine of whom revised their price targets upward within 24 hours of the report [2][3] - The average price target is $561, which is 20% above the pre-release consensus and 10% above the previous all-time high [3] Financial Performance - Q2 revenue contracted by 16.3%, but this was significantly better than analysts' expectations, outperforming consensus by 1600 basis points [8] - The Production and Precision Agriculture and Construction and Forestry segments showed resilience, contracting by only 6% and 1%, respectively, while Small Ag and Turf contracted by 23% [8] - Despite margin contraction due to deleveraging and cost pressures, the company reported a net income of $1.84 billion, which is sufficient to maintain a cash-flow positive quarter [9] Capital Returns - Deere & Company has a dividend yield of 1.22% and an annual dividend of $6.48, with a strong track record of dividend increases over the past four years [10] - The capital return in Q2 included dividends and share repurchases, resulting in a 1.26% yield and a 2.2% reduction in share count [10] - The company maintains a strong balance sheet with increased cash, decreased liabilities, and a 7% increase in equity for the quarter [10] Market Sentiment - Technical signals indicate a bullish market trend, with new highs and positive crossovers in MACD and stochastic indicators [4] - The stock forecast shows a 12-month price target of $504.38, with a high forecast of $619.00 and a low forecast of $389.00 [7] - Following the Q2 report, the stock price initially surged nearly 10%, indicating strong market support [12]

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