Deere

Deere Q3 2024 $DE (+0,19 %)

Q4 2024:

Sales: USD 11.143 billion (-28% year-on-year)

Net profit: USD 1.245 billion (-47% year-on-year)

Earnings per share (diluted): USD 4.55 (-45% year-on-year)

Operating cash flow (financial year 2024): USD 9.231 billion

Full year 2024:

Sales: USD 51.716 billion (-16% year-on-year)

Net profit: USD 7.1 billion (-30% year-on-year)

Earnings per share (diluted): USD 25.62 (-26% year-on-year)

Non-recurring factors

Legal settlements: USD 57 million profit before taxes

Depreciation and amortization: USD 28 million in the "Small Agriculture & Turf" segment

Restructuring costs: USD 157 million before tax (USD 124 million after tax)

Quarterly overview

Production & Precision Agriculture: 38% decline in sales, 64% decline in operating profit

Small Agriculture & Turf: Decline in sales of 25%, operating profit down 47

Construction & Forestry: 29% drop in sales, 36% decline in operating profit

Balance sheet overview

Assets:

Total: USD 107.32 billion (2024 vs. USD 104.09 billion in 2023)

Cash and cash equivalents: USD 7.324 billion (-1.8% year-on-year)

Inventories: USD 7.093 billion (-13% year-on-year)

Liabilities:

Total: USD 84.395 billion (+2.7% year-on-year)

Non-current liabilities: USD 43.229 billion (+12 %)

Equity:

Shareholders' equity: USD 22.843 billion (+4.8 %)

Profit and loss account

Breakdown of sales:

Production & Precision Agriculture: USD 4.305 billion (-38% year-on-year)

Small Agriculture & Turf: USD 2.306 billion (-25% year-on-year)

Construction & Forestry: USD 2.664 billion (-29% year-on-year)

Margins:

Operating Margin:

Production & Precision Agriculture: 15.3 % (previous year: 26.4 %)

Small Agriculture & Turf: 10.1% (previous year: 14.4%)

Construction & Forestry: 12.3% (previous year: 13.8%)

Cash flow

Operating cash flow (financial year 2024): USD 9.231 billion (+7% year-on-year)

Used for: USD 1.64 billion investments, USD 4.007 billion share buybacks and USD 1.605 billion dividend payments

Investment cash flow: USD -6.464 billion, characterized by acquisitions and expenses for leased equipment

Financing cash flow: USD -2.717 billion, mainly due to debt repayments and returns to shareholders

Segment analysis

Best segment: Financial Services (+13 % year-on-year sales growth), driven by higher portfolio values

Weakest area: Production & Precision Agriculture (-38% decline in sales year-on-year)

Competitive position

Deere remains a leader in precision agriculture, but faces challenges such as lower delivery volumes and difficult market conditions.

Outlook and management comments

Net profit forecast (financial year 2025): USD 5.0 to 5.5 billion

Agriculture & Turf:

Large agricultural machinery in the USA: decline of approx. 30% expected

Europe: decline in sales of 5-10% forecast

Construction & Forestry:

Global forestry: Stable to -5 %

Risks and opportunities

Risks:

Declining demand in the agricultural sector

Rising interest rates put pressure on financing

Disruptions in the supply chain and geopolitical tensions

Opportunities:

Investments in technology and precision agriculture

Partnership with Banco Bradesco in Brazil to promote growth

Five positive aspects

1. strong operating cash flow (+7 % year-on-year)

2. resilience in the Financial Services division (+13% sales growth)

3. continued investment in customer-oriented innovations

4. restructuring measures that are expected to generate annual savings of USD 220 million

5. strategic partnership in Brazil reduces risks and promotes growth

Five negative aspects

1. significant decline in sales (-28% year-on-year in Q4)

2. declining operating margins in all key segments

3. high restructuring costs (USD 157 million before taxes)

4. weakness in core markets such as the USA and Europe

5. increased write-downs and loan loss provisions

Earnings next week | all eyes on $NVDA (+2,01 %) 👀

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SpaceX's Starlink continues to revolutionize various industries.

The partnership of John Deere
$DE (+0,19 %) with Starlinkwhich provides fast and reliable internet, will be a real game changer for farmers who previously had poor or no internet connection.

- Remote diagnostics reduce both the time and cost of transporting large machines to service centers.

- Data exchange between machines increases efficiency and profitability.

Depot review September 2024 - The first green September in my depot since 2019 📈

September is generally regarded as the worst month on the stock market, with a negative monthly performance more than 50% of the time. This is also consistent with my experience since 2013. In 11 years, it has been negative 6 times and positive 5 times. From 2020 to 2023, the last 4 years were all negative. However, September 2024 is now the first positive September since 2019, which means it is exactly 50/50 for me - 6 positive and 6 negative Septembers since 2013.

The Fed's interest rate turnaround and the stimulus in China have certainly contributed to the positive trend

Monthly view:

In total, September was +1,2%. This corresponds to price gains of ~3.600€.

The MSCI World (benchmark) was +1.0% and the S&P500 +1.3%

Winners & losers:

A look at the winners and losers is particularly exciting this month.

On the winning side at the very top are my China ETF with € +1,300 and is thus back in the green for the first time in a long time. The following winners are also a colorful mix with Meta, Bitcoin, Home Depot and Sea. Really a very broad mix with no clear tendency towards regions, sectors or the like

On the loser side in my portfolio in September were mainly pharmaceutical stocks. Novo Nordisk, Amgen and Johnson & Johnson. Even worse, with price losses of ~€700 each, were only Palo Alto Networks and ASML.

The performance-neutral movements in September were just under €4,500. The premium refund from my private health insurance also played a large part in this. In September, I received over €2,000 back for the year 2023, which was of course invested directly to compensate for any higher pension contributions.

Current year:

My performance in the current year is +20,4% and thus above my benchmark, the MSCI World with 17.2%.

In total, my portfolio currently stands at ~321.000€. This corresponds to an absolute growth of ~€69,000 in the current year 2023. ~49.000€ of this comes from price increases, ~2.800€ from dividends / interest and ~17.000€ from additional investments.

Dividend:

• Dividends in September were 23% above the previous year at ~€360
• Amgen is in the lead with a (gross) dividend of €50 every 3 months. But Johnson & Johnson with €45 is also a delight
• In the current year, the dividends after 9 months are +25% over the first 9 months of 2023 at ~2.210€

Buys & sells:

• I bought in September for approx. 3,500€. 2,100 of this came from the premium refund from my private health insurance and went into the WisdomTree Global Quality Dividend Growth
• As always, my savings plans were executed:
• Blue ChipsLockheed Martin $LMT (+0,94 %) Republic Services $RSG (-1,09 %) Thermo Fisher $TMO (+0,81 %) ASML $ASML (-1,59 %) MasterCard $MA (-0,34 %) Deere $DE (+0,19 %) Northrop Grumman $NOC (-0,09 %) Itochu $8001 (-0,17 %) Salesforce $CRM (+0,69 %) Hermes $RMS (+0,75 %) Constellation Software $CSU (+0 %)
• 
  Growth: -
• ETFsMSCI World $XDWD (+0,24 %) Nikkei 225 $XDJP (-0,32 %) and the WisdomTree Global Quality Dividend Growth $GGRP (-0,09 %)
• 
  Crypto: Bitcoin $BTC (-0,24 %) and Ethereum $ETH (+1,28 %)
• 
  Sales there were none in September

Target 2024:

My goal for this year is to reach €300,000 in my portfolio. Due to the extremely positive market development in the current year, my portfolio currently stands at ~€321,000.

At the beginning of September, my portfolio was still quite a bit lower at €304,000 due to the weak start to the month. At this point, it was therefore quite a way off the previous high of €320,000 in June.

I have now reached a new high of €321,000 and am optimistic that I can still beat my year-end target of €300,000.

#dividends

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🚜 Deere: From king of the field to prince of construction?

Company presentation and historical development

$DE (+0,19 %) John Deere, better known under the John Deere brand, is a leading global manufacturer of agricultural machinery and construction equipment. With an impressive history dating back to 1837, the company was founded by John Deere in Grand Detour, Illinois. Originally revolutionizing agriculture with the development of an innovative, self-cleaning steel plow, Deere laid the foundation for John Deere's rise to a global corporation whose green and yellow machines and iconic leaping deer logo can now be found in fields and construction sites around the world.

Business model and core competencies

Deere operates in three clearly defined business areas:

1. Production & Precision Agriculture: this division focuses on tractors, combine harvesters and loaders developed specifically for medium and large-scale agricultural operations.

2. Small Agriculture & Turf: Here, Deere offers machines and solutions for smaller farms, livestock farming and the maintenance of green spaces.

3. construction & forestry: In this segment, the company manufactures machines for construction and forestry that are used on construction sites as well as in the forestry sector worldwide.

Deere's core competencies lie in the continuous development of high-performance, technologically advanced agricultural machinery. The company invests heavily in research and development, particularly in the areas of precision agriculture and automation. This innovative strength secures Deere a leading position in global agricultural technology and makes it possible to sustainably increase efficiency and productivity in agriculture.

Future prospects and strategic initiatives

Looking to the future, Deere is increasingly focusing on digitalization and automation to meet the growing demands of modern agriculture. The company is developing autonomous tractors and implementing artificial intelligence (AI) to optimize work processes in the fields and maximize crop yields. There is a particular focus on precision agriculture, in which machines and software solutions work closely together to make the use of resources such as water, fertilizers and seeds more efficient.

Deere is also driving forward the development of sustainable solutions, including electrically powered machines for smaller farms and the use of biofuels for larger agricultural machinery. Another important strategic initiative is the expansion of software-based services with the aim of increasing the share of recurring revenue. These services provide farmers with data-driven insights and enable them to manage their fields more efficiently.

Market position and competition

Deere is the undisputed market leader in the agricultural machinery industry and holds a market share of 50-60% in North America. This considerable lead over competitors such as $CNHI (+1,23 %) , $AGCO (+2,63 %) and $6326 (-0,02 %) underscores Deere's dominance in the global market. Not only the company's sales, but also its market capitalization clearly exceeds that of its competitors.

Deere's strong market position is supported by several factors:

- A history of almost 200 years, which consolidates the company as an established premium brand in the agricultural sector.

- Economies of scale in the areas of purchasing, production, marketing and research, which enable Deere to reduce costs and invest in innovation at the same time.

- Targeted expansion into adjacent markets, such as forestry machinery and road construction technology, which open up additional growth opportunities.

Share performance

Deere's share performance has been good in recent years Over the past five years, the company has achieved a total return of 169%. Despite the cyclical nature of its business, which is affected by fluctuations in agricultural markets, Deere remains an attractive investment option for long-term investors due to its innovative strength and robust fundamentals.

Development

Deere is by far the largest manufacturer of agricultural machinery and related equipment in terms of sales. Even if sales are expected to decline in 2024, the company's long-term development remains one of the strongest in the market

When looking at Deere's sales distribution, it quickly becomes clear that the company is much more than just an agricultural company. In addition to the agricultural sector, Deere is also active in the construction and forestry sectors, with the construction and forestry sectors in particular experiencing strong growth recently. Nevertheless, the majority of turnover still comes from agriculture.

In terms of growth, Deere is one of the frontrunners and continues to present impressive figures. If the Japanese companies are not taken into account when the yen is taken into account, Deere even takes first place, despite the considerable size of the company.

In terms of gross profit margin, Deere is in the top class and has been able to increase it continuously. However, this is not happening at too great a distance from Kabuto.

In terms of net profit margin, Deere is twice as strong as the competition and has also significantly improved this key figure in recent years.

Since 2020, Deere has also recorded positive free cash flow figures that clearly stand out from the competition.

In the area of share-based compensation (SBC), Deere has also recorded considerable growth that significantly exceeds sales increases. However, this development is problematic for shareholders as it indicates dilution of their shares and raises concerns about long-term value creation.

Nevertheless, the company has continuously carried out share buybacks in recent years to support its own share base and increase shareholder value.

While Deere's net leverage ratio is above 3%, only AGCO is better positioned in this regard.

In terms of EV to EBITDA ratio, Deere is among the better valued companies, reflecting the expectations for the company, despite its size, compared to its peers. In contrast, AGCO appears very favorably valued in this area.

Part 2:https://getqu.in/MD8MpF/

🚜 Deere: From king of the field to prince of construction? Part 1:https://getqu.in/27HkzI/

In the area of research and development (R&D) $DE (+0,19 %) Although Deere spends slightly less in percentage terms, the company invests the most in this sector in absolute terms.

In terms of shareholder yield, Deere offers shareholders the highest and best returns, but these are rather low compared to other sectors.

The payout ratio for all is in the green zone.

In terms of Return on Invested Capital (ROIC), Deere is behind AGCO, but has a return of over 10%.

Deere is by far the best positioned company in terms of return on equity (ROE)

In the area of Return on Capital Employed (ROCE), Deere is also above 10 % and is thus the front runner, just ahead of AGCO. $AGCO (+2,63 %) .

Conclusion

Deere has developed extremely well in recent years and is expanding successfully in various areas. The company has a strong brand and can show the best figures in almost all aspects. Looking to the future, Deere is also well positioned and has the opportunity to invest significantly more in the automation of its machines due to increasing margins. Deere is also the market leader in the US, which underlines the company's strong position in a challenging and competitive environment.

Thanks to its solid base in recurring revenue (ARR) and efficient data collection, I see Deere as the most future-proof investment opportunity in its industry. The company is able to finance costs and projects optimally, which brings significant benefits. In addition, Deere remains close to the competition in the area of research and development and does not fall behind.

I bought the shares a few months ago in the hope that Deere will successfully master the change and move ever closer to Caterpillar.

AGCO looks extremely attractive due to its current valuation. However, it remains to be seen whether this is a real bargain or a long-term downward correction, but it could be something for one or two people

🗓️ Earnings next week 🗓️

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$DE (+0,19 %)

But it's about time 🤩