Deere & Company, the American manufacturer of agricultural, construction, and forestry machinery, has reported a significant increase in its global net sales and revenue for the first quarter of its fiscal year. According to the company’s financial report, the net sales and revenue surged by 32%, reaching $12.7 billion.
The company’s construction and forestry segment also witnessed a considerable increase in net sales, which went up by 26% from $2.5 billion in the first quarter of 2022 to $3.2 billion in the same period of 2023. Deere attributed this growth to higher shipment volumes and price realization, although the negative effects of foreign currency translation partially offset it. The company’s UAW contract-ratification bonus costs also impacted the prior period.
John C. May, the Chairman and CEO of Deere & Company, expressed satisfaction with the results and attributed the success to favorable market fundamentals, healthy demand for their equipment, and solid execution from employees, dealers, and suppliers. May said, “We are, at the same time, benefiting from an improved operating environment, which is contributing to higher levels of production.”
Despite the positive results, the company’s dealer order books are still on an allocation basis due to the persistent demand-supply imbalance. While supply chain challenges have reduced somewhat, they remain fragile. Joshua Jepsen, Vice President and CFO of Deere & Company, said in an earnings call, “It is getting better, but we continue to experience higher-than-normal supply disruptions. We’re working with our supply chain and doing our best to try to ensure delivery to our customers.”
Furthermore, the limited inventory of new equipment is causing dealers to turn to used equipment at an unprecedented pace. Jepsen said, “Used equipment inventories are at low levels, and used equipment prices continue to be strong. This is a positive for customers as it reduces their trade differentials. This is especially true for both large ag and construction and forestry.”
Looking ahead, Deere & Company has raised its fiscal-year 2023 outlook and now expects net sales and revenue to increase by about 25%, up from the prior estimate of around 19%. The company also raised its earnings per share guidance to $22.50, up from $20.50 previously.
Deere & Company’s positive results and outlook are a testament to the strength of the agriculture and construction industries and the company’s ability to navigate supply chain challenges. However, the persistent demand-supply imbalance and supply chain disruptions remain a challenge for the company and its dealers.
With the company’s focus on used equipment, there is a chance that it might impact the sales of its new equipment in the short term. But this strategy might end up benefitting customers in reducing trade differentials and may even provide a steady stream of revenue for Deere & Company through the sale of used equipment.
I personally found the financial results and outlook of the company to be promising. For the future success of the company, its ability to adapt to the changing market will be critical.