I'm Buying Much More As Deere Surprises When It Matters Most

Core Thesis - The long-term bullish thesis for Deere & Company is based on factors such as population growth, declining global arable land, rising energy prices, and the necessity for farmers to invest in advanced technologies to enhance yields and reduce costs [2][28]. Financial Performance - In Q3 2024, Deere's net sales of equipment operations fell by 20% to $11.4 billion, with net income dropping by 42% and diluted EPS decreasing by 38% [9][10]. - The Production and Precision Ag segment experienced a 25% year-over-year decline in net sales, while the Small Ag and Turf segment saw an 18% decline [10][12]. - Despite the poor financial results, Deere's actual performance exceeded analyst expectations, with total revenues $2.4 billion higher than anticipated and EPS $0.65 above expectations [17]. Market Conditions - Current market challenges include low crop prices, high interest rates, and weak global manufacturing sentiment, which have led to reduced demand for agricultural equipment [14][21]. - The company is facing declining demand in key markets like North America and Brazil, exacerbated by high input costs and lower commodity prices [14][21]. Strategic Actions - Deere has proactively reduced production and inventory to align with demand, which helps avoid overproduction and supports pricing and margins [18][23]. - The company is focusing on integrating advanced technology into its product lineup, which is expected to enhance customer profitability and position Deere as a leader in agricultural innovation [21][22]. Future Outlook - Deere anticipates a 20-25% decline in net sales for its Production and Precision Ag and Small Ag and Turf segments, and up to a 15% contraction in its Construction and Forestry segment for the full year [21]. - The company maintains a strong balance sheet and is positioned for a rebound once economic conditions improve, particularly as aging equipment in North America creates replacement demand [22][27]. Investment Considerations - Deere's stock has historically performed well, returning approximately 400% over the past ten years, significantly outperforming the S&P 500 [6][8]. - The company has increased its dividend by 93% since 2020, reflecting a commitment to shareholder returns [4][28].