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The agricultural machinery giant is using software, connectivity, and automation to boost farm productivity; cut down on fuel, chemical, and water use; and allow customers to meet input-efficiency and emissions goals. It upgraded its harvest automation system in 2025 to add predictive inputs, which enable farmers to measure crop variability and control ground speed. Autonomous tractors allow farmers to cover more ground during crop cycles, the company says. Meanwhile, Deere has introduced technologies like See &amp; Spray Ultimate, which deploys cameras and machine learning to target weeds.

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Based in Moline, Ill., this maker of tractors, combines, and other agricultural gear endured a tough 2024, as weather disruptions and trade tensions fueled a global downturn in farming. The slump in U.S. homebuilding, meanwhile, hurt its construction equipment division. Overall, Deere’s revenue dropped 16% year over year, to $51.7&nbsp;billion.

The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

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F500-2023-081-Deere

John Deere—the machinery and equipment company famous for its iconic green tractor—had one of its most profitable years ever in 2022, reaching $7 billion, up 20% from the previous year, as it took a page from the tech industry’s playbook, developing self-driving tractors, satellite-linked smart equipment, and a software-as-a-service business. 
<ul> 
 	<li>Revenues in 2022 grew 19% as the company was able to pass much of the increase in production costs on to farmers who were flush with cash after corn and soybean prices hit record highs.</li> 
 	<li>In May 2023 Deere announced a plan to connect remote farms in Brazil and the U.S. to state-of-the-art machinery via satellite.</li> 
 	<li>The tractor maker suffered a legislative setback in Colorado in April 2023 when Gov. Jared Polis signed a “right to repair” bill, enabling farmers to fix their own equipment, thus ending Deere’s monopoly on repairs of its machinery.</li> 
</ul>

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Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

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F500-2022-084-Deere

A staple of American manufacturing for nearly 200 years, Illinois-based Deere makes agricultural and construction machinery as well as diesel engines and lawn care equipment. In 2021, the company posted 24% year-over-year revenue growth. Profits jumped, too, with demand for its machinery snapping back as the global economy rebounded. Deere also smoothed its labor outlook for the near future by reaching a six-year labor agreement with the United Auto Workers union in November 2021, ending a five-week strike. After Russia’s invasion of Ukraine, Deere suspended shipments of machinery to Russia and Belarus.

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Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

<span data-sheets-value="{&quot;1&quot;:2,&quot;2&quot;:&quot;Even during a pandemic, people still have to eat. Agriculture was one business to ride out 2020 in a strong position. Deere, the 184-year-old American icon and maker of heavy machinery, saw strong agricultural sales corresponding with the seasonality of farming. That was largely enough to counter the lower demand for construction equipment made by Deere over the same time frame, with construction projects halted owing to COVID-19. Deere, however, still saw revenue fall 9.5%, to $35.5 billion, between 2019 and 2020. &quot;}" data-sheets-userformat="{&quot;2&quot;:12673,&quot;3&quot;:{&quot;1&quot;:0},&quot;10&quot;:2,&quot;11&quot;:4,&quot;15&quot;:&quot;Calibri&quot;,&quot;16&quot;:11}">Even during a pandemic, people still have to eat. Agriculture was one business to ride out 2020 in a strong position. Deere, the 184-year-old American icon and maker of heavy machinery, saw strong agricultural sales corresponding with the seasonality of farming. That was largely enough to counter the lower demand for construction equipment made by Deere over the same time frame, with construction projects halted owing to COVID-19. Deere, however, still saw revenue fall 9.5%, to $35.5 billion, between 2019 and 2020.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-88-Deere

<span data-sheets-value="{&quot;1&quot;:2,&quot;2&quot;:&quot;Even during a pandemic, people still have to eat. Agriculture was one business to ride out 2020 in a strong position. Deere, the 184-year-old American icon and maker of heavy machinery, saw strong agricultural sales corresponding with the seasonality of farming. That was largely enough to counter the lower demand for construction equipment made by Deere over the same time frame, with construction projects halted owing to COVID-19. Deere, however, still saw revenue fall 9.5%, to $35.5 billion, between 2019 and 2020. &quot;}" data-sheets-userformat="{&quot;2&quot;:12673,&quot;3&quot;:{&quot;1&quot;:0},&quot;10&quot;:2,&quot;11&quot;:4,&quot;15&quot;:&quot;Calibri&quot;,&quot;16&quot;:11}">Even during a pandemic, people still have to eat. Agriculture was one business to ride out 2020 in a strong position. Deere, the 184-year-old American icon and maker of heavy machinery, saw strong agricultural sales corresponding with the seasonality of farming. That was largely enough to counter the lower demand for construction equipment made by Deere over the same time frame, with construction projects halted owing to COVID-19. Deere, however, still saw revenue fall 9.5%, to $35.5 billion, between 2019 and 2020.

For an astounding 13th straight year, Apple claims the top spot in Fortune’s annual ranking of corporate reputation, based on a survey of almost 3,800 executives, directors, and analysts.

This year's Fortune Global 500 generated $33.3 trillion in revenues and $2.1 trillion in profits.

G500-2020-319-Deere

John May is not even a full year into his tenure as only the 10th chief executive ever to lead the 183-year-old American icon. He finds himself at the helm of the $39.2 billion agricultural giant as it rolls with virus-related punches; Deere briefly suspended production of construction and forestry equipment at some facilities amid weakened demand and pivoted to manufacturing 400,000 face shields for health care workers. For 2019, the company's revenue rose 5.1% year-over-year and profits spiked by 37%, to $3.3 billion. But even before the pandemic, Deere said it expected sales to fall at least 10% in 2020.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-084-Deere

John May is seven months into his tenure as only the 10th chief executive ever to lead the 183-year-old American icon. He finds himself at the helm of the $39.2 billion agricultural giant as it rolls with virus-related punches; Deere briefly suspended production of construction and forestry equipment at some facilities amid weakened demand, and is now manufacturing 400,000 face shields for health care workers. The company's revenue rose 5.1% year-over-year and profits spiked by 37%, to $3.3 billion in 2019. But even before the pandemic, Deere said it expected sales to fall at least 10% in 2020.

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Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Impact Segment

Deere (commonly known as John Deere) is an agricultural giant that manufactures and sells tractors, harvesters, loaders, and other equipment used by farmers worldwide. Founded in 1837 as a maker of steel plows pulled by horses, the company has expanded into heavy machinery used for golf course maintenance, snow removal, and logging. The company introduced a self-driving tractor in 2022 and is pushing into machine learning to help increase agricultural production. As of 2024, it was among a small number of companies that have been on the Fortune 500 every year since the list’s inception in 1955.

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Deere (DE): Company Profile, Stock Price, News, Rankings

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Deere

deere

Good morning, and welcome to Deere and Company Second Quarter Earnings Conference Call. Your lines have been placed on listen only until the question and answer session of today's conference. I would now like to turn the call over to Mr. Josh Beale, Director of Investor Relations. Thank you.

Hello. Welcome and thank you for joining us on today's call. Joining me on the call today are John May, Chairman and Chief Executive Officer Josh Jepsen, Chief Financial Officer and Josh Rohlitter, Manager Investor Communications. Today, we'll take a closer look at Deere's second quarter earnings and spend some time talking about our markets and our current outlook for fiscal twenty twenty five. After that, we'll respond to your questions.

Please note that slides are available to complement the call this morning. They can be accessed on our website at johndeere.com/earnings. First a reminder, this call is broadcast live on the Internet and recorded for future transmission and use by Deere and Company. Any other use, recording or transmission of any portion of this copyrighted broadcast without the express written consent of Deere is strictly prohibited. Participants in the call, including the Q and A session, agree that their likeness and remarks in all media may be stored and used as part of the earnings call.

This call includes forward looking statements concerning the company's plans and projections for the future that are subject to uncertainties, risks, changes in circumstances and other factors that are difficult to predict. Additional information concerning factors that could cause actual results to differ materially is contained in the company's most recent Form eight ks, risk factors in the annual Form 10 ks as updated by reports filed with the Securities and Exchange Commission. This call may also include financial measures that are not in conformance with accounting principles generally accepted in The United States Of America, GAAP. Additional information concerning these measures, including reconciliations to comparable GAAP measures, is included in the release and posted on our website at johndeere.com/earnings under Quarterly Earnings and Events. I will now turn the call over to John May for opening comments before we begin with our formal remarks.

Good morning, and thank you for joining us today. This quarter was marked by historic levels of volatility and significant uncertainty across our end markets, given the dynamic global trade backdrop. During times like this, it's important to reflect on and reaffirm our core values and the priorities that drive our teams at John Deere every day, which we've noted on slide three of our presentation. Doing so helps us maintain our focus and resilience, providing a stable foundation that guides our decision making and actions. Everything that we do at John Deere starts with our customers, who provide food, fuel, clothing, shelter and infrastructure for the world.

We're honored to have served them for nearly two hundred years, and we will continue to do so for the next two hundred. In times of uncertainty, we must remain steadfast in this commitment. Practically speaking, this means being deliberate in every action and keeping customers at the forefront of every decision. We'll continue to honor our commitments from agreed upon prices to delivering the highest level of uptime and reliability expected from our products. It's in times like these that we have the opportunity to foster new and strengthen existing customer relationships that end up enduring for generations.

Our second priority is our commitment to executing our plan, which involves taking actions to navigate more uncertain markets, while also maintaining investments in value unlocking products and solutions. Our commitment to our smart industrial strategy remains unwavering. The opportunity to make our customers more productive, profitable, and sustainable is tremendous, and we never lose sight of that. In the near term, we'll continue to proactively manage what we can control, cost, production, inventory and quality to navigate this environment, while driving the margins that fuel our investments in the future. Our performance this quarter is a powerful testament to the results that come from this approach.

On that note, I'd like to commend our teams for the excellent results they delivered this quarter despite the difficult macro environment we were facing. Finally, I'd like to reaffirm our investment in the future, a future rooted in innovation that began nearly two centuries ago in a blacksmith shop in Grand Detour, Illinois. Today, that innovative spirit continues with Smart Industrial, our strategy that combines investment in advanced technology with our legacy of manufacturing excellence. We're proud of our storied U. S.

History. And with nearly 80% of our U. S. Sales and 25% of our international sales built right here in U. S.

Manufacturing locations. We stand by and continue to embrace our American manufacturing heritage as we deliver value for our customers around the world. Smart Industrial unlocks value through the integration of cutting edge technology with premium hard iron equipment. We will continue to robustly invest capital and R and D to bring these integrated solutions to market, enhancing our global competitiveness. I'm proud that this innovative work will build on our American roots, and we are prepared to invest $20,000,000,000 in The U.

S. Over the next decade as we spearhead new product development, cutting edge technologies and more advanced manufacturing. These strategic investments are an opportunity to further leverage an already broad base of U. S. Assets that include over 60 facilities across 16 states, supported by a highly skilled workforce that has built John Deere into the iconic brand it is today.

As we look forward, we're more excited than ever about the opportunities ahead and our ability to drive unparalleled value for our customers worldwide by leveraging our rich heritage. It's a testament to our dedication to innovation, excellence and our customers' success.

Thanks, John. We'll now proceed with our remarks on the quarter. John Deere delivered a better than expected second quarter with an 18.8% margin for the equipment operations, demonstrating exceptional execution amidst challenging market dynamics.

Notably, margins exceeded projections despite tariff headwinds due to better than expected sales and favorable production costs stemming from efficiency gains in our material sourcing and factory operations. However, as we look to the second half of the year, global uncertainty continues to weigh on customer sentiment across end markets. And while the top end of our fiscal twenty twenty five outlook remains relatively unchanged from prior guidance, a fluid tariff environment has led us to broaden our guidance range as we actively work to mitigate impacts to both our customers and beer. Slide four opens with our results for the second quarter. Net sales and revenues were down 16% to $12,763,000,000 while net sales for the equipment operations were down 18% to 11,171,000,000.000 Net income attributable to Gearing Company was $1,804,000,000 or $6.64 per diluted share.

Turning to our individual segments, we begin with the Production and Precision Ag business on slide five. Net sales of $5,230,000,000 were down 21% compared to the second quarter last year, primarily due to lower shipment volumes. Price realization was positive by just under one point. Currency translation was negative by roughly two points. Operating profit was $1,148,000,000 resulting in a 22% operating margin for the segment.

The year over year decrease was primarily due to lower shipment volumes and an unfavorable sales mix, coupled with the negative effects of foreign currency exchange. These headwinds were partially offset by lower production costs and price realization. Moving now to Small Ag and Turf on slide six. Net sales were down 6%, totaling $2,994,000,000 in the second quarter as a result of lower shipment volumes, partially offset by price realization. Price realization was positive by just under one point.

Currency translation was negative by roughly zero five point. Operating profit was approximately flat year over year at $574,000,000 resulting in a 19.2% operating margin. Lower production costs, lower warranty expenses and price realization were offset by lower shipment volumes and an unfavorable sales mix. Slide seven gives our industry outlook for ag and turf markets globally. We continue to expect large ag equipment industry sales in The U.

S. And Canada to be down approximately 30% due to pressures from high interest rates, elevated late model use inventory levels and trade uncertainty. These headwinds are slightly mitigated by stable crop prices given tighter global stocks and bolstered farm balance sheets strengthened by the distribution of government funds. For small ag and turf in The U. S.

And Canada, industry demand is now expected to be down between 1015%. While the dairy and livestock segment remains at historically strong levels of profitability and certain high value crops like almonds returned to profitability, equipment purchases remained subdued due to prevailing uncertainties and elevated costs. Demand has been further restrained by deterioration in turf and compact utility tractor sales due to consumer confidence and high interest rates weighing on purchase decisions. Moving to Europe, the industry is still projected to decrease approximately 5%. Sentiment in the region is trending higher given strong dairy and livestock margins and an improving arable outlook.

Stabilized commodity prices and input costs along with improving interest rate environment should provide more planning certainty despite the low average yields in key markets. In South America, industry sales forecast for tractors and combines remain roughly flat. In Brazil, sentiment continues to improve as crop yields recover and corn and soybean profitability returns. Additionally, continued high margins in coffee production are driving increased demand for small and midsized tractors. However, record crop production levels are likely to put pressure on commodity prices, capping overall growth in farm profitability for the region, while high interest rates continue to temper demand.

Industry sales in Asia are now projected to be flat as the outlook for tractor sales in India improves, supported by favorable growing conditions, steady crop acreage and increased availability for agricultural credit. Next, our segment forecasts begin on slide eight. For Production and Precision Ag, our net sales forecast for the full year remains down between 1520%. The forecast now assumes roughly a point of positive price realization for the full year offset by 1.5 points of negative currency translation. Our full year forecast for this segment's operating margin is now between 15.517%, primarily due to tariff impacts.

Slide nine shows our forecast for the Small Ag and Turf segment. We now expect net sales to be down between 1015%. The guide includes a zero five point of positive price realization and flat currency translation. The reduction from the prior quarter is primarily due to softening demand in The U. S.

Turf and compact utility tractor segments, partially offset by improved sales projections for midsized tractors in Europe and small tractors in India. The segment's operating margin guide is now between 11.513.5%, primarily due to tariff impact and the reduction in projected U. S. Turf and compact utility tractor shipment volumes. Shifting over to Construction and Forestry on slide 10.

Net sales for the quarter declined roughly 23% year over year to $2,947,000,000 due to lower shipment volumes. Price realization was negative by just under 1.5 points. Currency translation was also negative by roughly less than zero five point. Operating profit was down year over year at $379,000,000 resulting in a 12.9% operating margin due primarily to lower shipment volumes and an unfavorable sales mix as well as negative price realization. Slide 11 describes our construction and forestry outlook.

Industry sales projections for earthmoving equipment in The U. S. And Canada remain unchanged with construction equipment expected to be down around 10% and compact construction equipment expected to be down around five End markets continued to see high utilization as construction backlogs are steady and construction employment remains at all time highs. However, trade uncertainty and high interest rates are pressuring order activity for both construction and compact construction equipment. U.

S. Government infrastructure spending continues to provide support to the industry. However, projections for single family housing starts are moderating given macro uncertainty and higher mortgage rates. Similarly, rental sales continue to soften while high interest rates continue to pressure multifamily and commercial real estate markets. Global forestry markets are expected to be flat to down 5% as all global markets remain challenged.

Global road building markets are forecasted to be roughly flat with continued strong end market demand globally. In particular, record sales at our Bauma trade show in April reinforced the uptick we're seeing in sentiment and demand throughout Europe. Moving on to the Construction and Forestry segment outlook on slide 12. 20 20 five net sales remain forecasted to be down between 1015%. Net sales guidance for the year includes one point of negative net price realization and flat currency translation.

The segment's operating margin is now projected to be between 8.511.5% due primarily to tariff impacts and to a lesser degree lower price realization. Now transitioning to our financial services operations on slide 13. Worldwide Financial Services net income attributable to Deere and Company in the second quarter was 161,000,000 Net income was flat due to less favorable financing spreads and a higher provision for credit losses, which were offset by lower SA and G expenses and a reduction in derivative valuation adjustments. For fiscal year twenty twenty five, our outlook remains at $750,000,000 as benefits from a favorable compare to special items related to the sale of Banco John Deere and lower SA and G expenses are partially offset by less favorable financing spreads. And finally, slide 14 outlines our guidance for net income, effective tax rate and operating cash flow.

For fiscal year twenty twenty five, our outlook for net income has widened to between $4,750,000,000 and $5,500,000,000 Next, our guidance incorporates an effective tax rate between 202%. And lastly, cash flow from the equipment operations remains projected between $4.5 and $5,500,000,000 This concludes our formal comments. We'll now shift to a few topics specific to the quarter before we open up the lines to questions from our investors. Let's begin our discussion with Deere's performance in the quarter. We saw net sales increase sequentially, albeit down year over year.

Additionally, margins were down roughly two points year over year, but grew sequentially to come in at just under 19% for the quarter. While there are clearly macro headwinds at play, the quarter represents strong operational performance. So Josh Biel, can you take us off with a breakdown of the quarter?

Sure, Josh. And I think John said it best earlier.

This quarter was about resilience through uncertainty. Despite the macro volatility, we executed a plan to achieve better than expected results across all three of our equipment operations segments. Our factories ran well, supporting higher than expected sales volumes, particularly in North American large ag. Additionally, production cost favorability was better than anticipated, reflecting our focus on driving material costs and overheads out of the business as we manage through this downturn. Also, recall that lower net sales in the first quarter reflected a shift of shipments to later in the fiscal year.

This quarter, we saw some of those volumes materialize. Turning to Construction and Forestry. Our second quarter results reflected a return to seasonal production in line with retail demand across our earthmoving factories, which were shut down for nearly half of the first quarter as we right sized inventory levels. Sequential sales and margin improvements were partially offset by negative price realization in the quarter. However, our road building business delivered another quarter of strong margins and the stable global sales, helping support our overall division financials.

Maybe one final point on the quarter. It's important to contextualize that the equipment operations results that we delivered were net of roughly $100,000,000 in incremental tariff headwinds. All in, we feel really good about what we were able to accomplish across all divisions in Q2.

Thanks, Josh. That's a great segue into my next question, which is probably top of mind for everyone given there's been a lot of fluctuation in trade policy over the last few months.

As you noted, we saw roughly $100,000,000 of tariff headwinds in the second quarter. What should we expect going forward? And what have we incorporated into our guide for the rest of the year?

Sure, Josh. As you noted, the trade environment is certainly fluid, evidenced by trade agreements and adjustments to tariff levels announced in this past week.

We're monitoring these developments closely while concurrently planning and executing mitigation strategies. To provide context on Deere's potential tariff exposure, we provided a geographic breakdown of U. S. Complete good and component sourcing in the appendix of today's slide deck. As John noted earlier, nearly 80% of U.

S. Complete good sales are from products built at our U. S. Manufacturing facilities, with over 75% of the components used at those facilities sourced from U. S.

Based suppliers. The majority of U. S. Completed sales sourced outside The U. S.

Are tied to midsized tractors and roll building equipment from Europe. On the component side, our primary non U. S. Sourcing is from Mexico and Europe. As it relates to our forecast, we expect a pre tax tariff impact in fiscal year twenty twenty five of just over $500,000,000 should these tariff levels continue throughout the remainder of the fiscal year.

This forecast is based on the impact of tariffs in effect as of May 13, including the reductions in reciprocal and retaliatory tariffs between China and The United States announced earlier this week. Using this baseline assumption as a starting point, we've expanded our guidance range to account for scenarios that may evolve as the year plays out. For context on the split by business unit, we would expect 40% of the cost to impact our Construction and Forestry operations, with about 35% hitting small lag and turf and about 25 hitting production and precision ag.

Hey, this is Justin. I'd like to quickly call out a few of the mitigation efforts we're taking to minimize the impact of tariffs on our customers, dealers and deer.

Teams across the organization are working diligently not only to understand and quantify risks, as Josh Beal noted, but also to mitigate impacts where there are clear, executable solutions available. One example is the work we've done to certify eligible products for USMCA and ag use only exemptions for Mexico and Canada. Decertifications were not required historically as our products were generally duty free. In only a few weeks, we've been able to successfully certify completeness and components that make up the majority of the potential exposure from these countries. Additionally, our supply management team has been working to optimize our global trade flows, actively moving component sourcing where we see no regret solutions.

Overall, our teams are doing exceptional job to position us well as we navigate the current environment. Now turning to potential price action. We don't see much opportunity for price mitigation to impact fiscal twenty twenty five given our order books for most product lines are nearly full for the remainder of the year. That being said, we're contemplating tariff impacts on our cost structure as we look to model year 2026 pricing. However, we are doing so being very mindful of the dynamic environment and the pressures our customers have had to deal with over the past few years.

Thanks for that color, Josh and Josh. Going back to the breakdown on tariff costs by segment, can you walk us through why we're seeing such outsized impact on our CA and F business? And then more broadly, can you give us an update on market commentary and how that's impacting our guide?

It's a great call out Josh and an important point to clarify. I'll start by reiterating that the majority of the margin compression seen in our updated C and F guide this quarter was driven by forecasted tariff impact.

That exposure is primarily driven by three areas. First, U. S. Sales from our road building business are exposed to the 10% global tariffs as production is located almost entirely in Germany. Second, we currently operate under supply agreement with our former JV partner for excavators, a product line that makes up roughly 40% of the earthmoving market.

This supply agreement applies to both complete goods sourced from Japan along with Japanese sourced components for production in our North Carolina factory. It's important to note, however, that this exposure will reduce over the next few years as we begin to roll out Deere designed and U. S. Manufactured excavators. Finally, the earthmoving market is more exposed to China component sourcing than our ag business, given the robust and mature supply base for construction equipment that developed in that region over the past two decades.

Looking at the C and F industry, utilization of earthmoving equipment in our end markets remains healthy, while current uncertainty has weighed on new equipment replacement demand. Higher levels of price competition are also impacting the European first moving market, which is reflected in our revised pricing outlook for the year. It's notable though that better than expected material favorability is helping to offset some of the margin impact of the additional pricing actions that we're taking.

This is Justin. One thing I'd like to add here relates to our road building business.

Just this past month, we were in Munich for Bauma, the world's largest construction machinery show held every three years. This is an incredible event for our Bertkin team. Not only did we see strong sentiment and record orders, but we have the opportunity to showcase the significant strides we're making in tech advancements for the industry, including the launch of the John Operations Center for road building production systems. This was on top of the integration of John Deere engines, guidance systems and displays into road building equipment at the show. Given the significant similarities between large ag and road building in terms of repeatable jobs and precise execution to define specifications, we can extend the John Deere tech stack to Vertkin equipment to enable more digitalization, automation and ultimately value for our customers.

This is John. It's important to highlight that the Virten tech story is exactly what we envisioned when we launched our smart industrial strategy in 2020. By focusing on the jobs that our customers do in their respective production systems, we can target our development to solve their biggest pain points. Combining that focus with a centralized tech stack, which makes leveraging technology across production systems easier and more efficient, we can bring value accretive solutions to our customers faster and with greater impact and better capital allocation.

It's really exciting to watch as our tech stack expands beyond just our large ag business. Turning now to ag. I'd like to start with farm fundamentals. So Josh Field, can you walk us through what our farmers are experiencing as well as what that means for deer in the back half of the year?

Trade uncertainty is having an impact on customer sentiment, creating a headwind for the market. However, crop prices have generally stabilized, albeit at lower profitability levels due to tight stocks driven by better than expected consumption and lower than expected crop production. Notably, excluding China stock, global grain and oilseed stocks to use ratios are roughly at twenty year lows. Additionally, input costs have fallen for a third consecutive year, though they remain above long term averages. Finally, nearly 75% of the $10,000,000,000 in direct U.

S. Government payments under the Emergency Commodity Assistance Program have been distributed, providing American farmers with liquidity following a challenging twenty twenty four-twenty twenty five crop year. And so, when excluding tariffs, we've seen some stabilization in the North American ag market, which offers some reassurance should uncertainty levels abate over the course of the year.

It's also worth noting that as we saw with the trade deal announced last week with The UK, ag commodities and ag based energy are at the forefront of the U. S.

Administration's trade policy agenda. Additional demand and market access for U. S. Producers is positive and incremental demand may drive improved prices based on the tight stocks to use ratios that Josh mentioned.

Shifting to global markets, we are continuing to see early signs of sentiment shift in South America as Brazilian farmers benefit from improved corn and soybean profitability as crop yields recover amid a weakened real. While European markets remain at sub trough levels, we're seeing some green shoots in that region as well. European growers are seeing stability in wheat prices, which along with a return to trend yields should support a recovery in key arable crop markets alongside an already strong dairy and livestock segment. Turning to order books, availability for both North American produced large tractors and European produced mid tractors is into October. And in Brazil, our order books are full through the third quarter.

It's worth noting that we have less order visibility in turf equipment and compact utility tractors. The reduction in our small ag and turf guide embeds lower demand in these markets, driven by weaker consumer confidence.

Perfect. Thanks, Josh. Shifting to inventory, can you unpack what we're seeing over the last quarter for both new and used?

Yeah, absolutely. The current focus for Deere is centered on used inventory in North America, as actions we took over the prior eighteen months helped to rightsize new inventory levels in The U. S. And globally. For example, in North America, our new inventory for tractors above two twenty horsepower is down over 40% year over year on a unit basis, while new combines are down nearly 25%.

The story is a little bit different for used inventory, where a higher than normal mix of late model year tractors continues to persist in the North American market. While Deere used high horsepower tractors were up slightly quarter over quarter, it's important to call out the seasonal build and use that occurs as pre planting deliveries of new equipment drive a higher level of trade in. Despite the seasonal increase, we feel confident in our plan to reduce new stacker inventories, as we've seen the impact of similar actions reduce combine inventory by nearly double digits year over year to below the ten year average. Notably in combine, late model year equipment has declined more significantly than other vintages, helping return used combines to a more normal distribution of equipment age. Through increased contributions to pool funds for dealer development, new financing options that support customer purchases and make incentive dollars go further, and our dealer network working with every customer to understand their individual needs, we're executing our plan to drive down used inventories.

This is John. It's worth emphasizing that we are tightly aligned with our channel and our focus on rightsizing that secondary market that Josh referred to. We have the best dealers in the industry and together we're taking the actions needed to bring down tractor inventories. I'm confident that our approach will yield results. And I'm appreciative of our dealers for their support in this effort.

Thanks, John and Josh. Continuing with large ag, 2025 represents a major milestone in our tech journey as we not only announced the commercialization of autonomous tillage in model year 2026, but we're also lapping the first year cohort of tech offerings like CN Spray and Precision Essentials. Can you give us an update on the latest progress across our precision ag solutions?

Absolutely, Josh. And I think it's important to frame this across three areas: capabilities, adoption and utilization.

I'll start with capabilities, which is a part of this tech journey that we don't speak about enough and is underappreciated in terms of its importance. Capabilities are the foundational building blocks, primarily internal to Deere and our dealers that ensure our customers are maximizing the value of our technology in a seamless and easy to access manner. We've been investing in these capabilities for the last several years and are now beginning to see their benefits come to fruition. For example, we've implemented and scaled a license management system integrated with the Jinder Operations Center to handle hundreds of thousands of licenses, enhancing the customer experience for purchasing and renewing solutions. We've also built out a customer success function that helps ensure our customers are getting the most out of our technologies.

For example, this spring season, we're using automated intervention to ensure that customers are realizing the full value of Sea and Spray in the field. Our channels align with us in this work, as our dealers are also investing in capabilities through connected support and precision ag specialist roles that support customers as they integrate new solutions and technologies into their operation. These capabilities are a foundational platform that will continue to build as we progress on our smart industrial journey. Turning to adoption, we're seeing continued growth in customers choosing precision tech as we expand our suite of offerings and bring them into more geographies across the globe. Furthermore, for many of these technologies, our solutions as a service business model makes tech more affordable, accessible, and adaptable for our customers.

A perfect example is Precision Essentials. In 2025, we're seeing greater adoption as we expand this solution to additional markets. In fact, in the first half of this fiscal year, we've already received nearly 10,000 orders globally, exceeding the entire fiscal twenty twenty four order count in just six months. Brazil alone accounts for over 3,500 of those twenty twenty five orders and we're seeing strong order activity in North America and Europe as well. Going forward, success for this and other subscription based technologies will depend heavily on our ability to drive license renewals year over year.

2025 marks our first year of renewals for the 2024 Precision Essentials cohort, where we have a year one goal of 70% renewal. Nearly two thirds of eligible machines have renewed thus far and we expect that to increase as we continue to engage with our customers in the renewal process. Finally, the best way to enable technology growth is through utilization. Continued growth in the number of acres covered by Deere's precision offerings is the best indicator that customers are seeing value in the technology and will continue to use it season after season. We're encouraged by the momentum we're seeing in utilization of See and Spray.

As you'll recall, in 2024, we had a few hundred See and Spray units running in North America, with those units ultimately covering 1,000,000 acres during last year's spraying season. In 2025, we have over 1,000 new orders for See and Spray, which significantly increases the population of machines that we'll be running this year. It's worth highlighting for the customers that ran Sea and Spray in 2024, we're seeing greater utilization on the same machines in the 2025 season and those same customers have invested in more Sea and Spray units this year. Effectively, what we're seeing is a compounding effect, more units with more utilization across more farms. The combination of capabilities, adoption and utilization is continuing to drive more depth and breadth of engagement with Deere Precision Technologies across the world.

Digital engagement is a great proof point for this, represented by the utilization growth we're seeing in the John Deere Operations Center. Year over year, engaged acres grew by nearly 15% to just over four seventy five million acres, while highly engaged acres grew by over 25% and now represent nearly 30% of total engaged acres. We are encouraged by the trend lines we're seeing as these numbers validate not only the effectiveness of our technology, but also the strategy by which we are bringing them to market.

This is Justin. One point to add here, which we increasingly talk about is the opportunity to extend these technologies to our Brazilian customers, who are in many cases just beginning their tech journey.

In fact, earlier this month, we had our largest product introduction to date at Brazil's AGRA Show. Given this immense opportunity and our commitment to investing in Brazil for Brazil, we are also excited to announce our Brazil Investor Day on June 10 in Indiatuba at our recently opened R and D center. As we celebrate our twenty fifth anniversary in Brazil, our livestream event will showcase the incredible opportunity that exists along with the strong foundation we have built over the past quarter of a century, which uniquely positions us to drive differentiated value and sustainable growth for our customers and Deere. Additional information can be found in the quarter's presentation and on our website.

Shifting now to our last topic. I'd like to walk through our capital allocation strategy. Josh Sheffson, given the market volatility and uncertainty, what can you share about the actions we're taking to ensure we can support both customers and shareholders during this time.

Our use of cash policy remains the same. It starts with maintaining a mid single A or better credit rating to ensure John Deere Financial can continue to provide customers with cost effective financing.

This is even more important in the current environment when many financial institutions are less willing to participate in the ag space. Our next priority is investing in the business. By focusing on value accretive projects and solutions at all points in the cycle, we're able to exit downturns with a strong pipeline to deliver growth and competitive differentiation. Ultimately, by driving more value for our customers, we can drive more value for our shareholders, which we'll distribute via dividends and share repurchases. All this is predicated on prudent cash management for the business and even more so during periods of heightened market volatility.

And as we have in the past, we've taken steps to solidify our balance sheet and bolster liquidity. I'm confident in our use of cash policy and ability to proactively plan and strategically execute in any market environment.

Thanks, Josh. Great update. And before we open up the line to questions, do you have any final comments you'd like to share?

Yeah. Thanks, Josh. The second quarter highlighted strong execution across the organization, and I'm proud of what the team has accomplished and the resiliency demonstrated in the face of significant uncertainty. We responded with measured actions to deliver optimal long term outcomes for all stakeholders. Our near term plan is focused on how we navigate this cycle.

The actions we've taken continue to yield results and position us well for the future. And we're encouraged by the customer value our long term strategy is generating. Customers are choosing our production system offerings because they understand the outcomes the Deere solution provides. We're excited by the opportunities to expand our technology across business units and product lines, leveraging our investments in one business to drive returns in others. We'll continue to explore and invest in opportunities both organic and inorganic that provide strong returns for our customers and In closing, we're committed to our customers and focus squarely on driving long term value for them as we look to mitigate disruptions and volatility in their day to day operations.

We take seriously the trust our customers place in gear to ensure they can execute their work. And to do so, we hold ourselves to the highest standards to ensure we can deliver on our promise of providing the highest quality machines, most value enhancing technologies and best customer service and support in the industry.

Thanks, Josh. Now let's open it up to questions from our investors. We're now ready to begin the Q and A portion of the call.

The operator will instruct you on the polling procedure. In consideration of others and to allow more of you to participate in the call, please limit yourself to one question. Operator, we're ready for the first question.

Thank you. We will now begin our question and answer Our first question comes from Rob Wertheimer from Melius Research. Your line is open.

Thanks. And apologies everybody. I'd like to start out with a strategic question because I thought your comments on the SaaS and the adoption per the continued rollout on SeamSpray were really interesting. Can you kind of talk about how many different SaaS models you kind of have currently? I'm not sure I understand fully what the Precision Essential cohort product line is.

And then what does the pipeline look like for that? We obviously all understand your long term goals. I don't know if you have a bunch of features that you're kind of rolling out this year, next year or the year after? And how many different offerings you're doing in that SaaS world now? I know you've worked hard on getting farmers to sort of see the value of it.

I'm curious about your progress. Thank you.

Deere (DE) Q2 2025 Earnings Call Transcript

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