Deere & Company (DE) 22 Nov 232023 Q4 Earnings call transcript

Good morning, and welcome to Deere & Company's Fourth Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. Josh Beal, Director of Investor Relations. Thank you.

You may begin.

Hello. morning. Good call of Jepsen, Rohleder, Investor Investor the Josh Financial Manager are Communications. Director Beal, Relations; today on Chief Josh Officer; of Also and Josh and at take and markets outlook XXXX. fourth closer we'll year current time look fiscal Today, quarter about a our earnings spend for our some talking Deere's call your respond After that are morning. that, to we'll available this slides note questions. Please to complement the on accessed be our can johndeere.com/earnings. website They at

for agree of media the the their future reminder. are in This includes call as circumstances that being are that uncertainties, and Internet First, consent used Deere and difficult prohibited. is on Company. forward-looking remarks broadcast and recording plans recorded of of other risks, and a may other factors -- reminding for strictly written copyrighted Participants changes & future company's of transmission the broadcast is stored predict. and the session, the by any use call. This all use, part to live the likeness projections express statements that in this the earnings call to and including Deere without Any be Q&A subject or in portion transmission call, concerning

may actual Additional with the States in Securities contained Form in information GAAP. X-K, financial updated the of reports generally with accepted filed factors the that as include by accounting also results measures in that conformance United Risk Annual company's and most to cause Commission. This concerning differ is Factors the are materially could principles in recent Form America, not call XX-K Exchange

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Deere year strong part finished for morning, an an John of fourth quarter, to in margins operations. early happy with to thanks excellent the and XX.X% everyone. Good holidays equipment

billion XXXX. Operating for operational performance net helping top improved the of production growth and and the was year just Across in for cash resulted shy demand, sales in our strong revenue margins flow. throughout year nearly came market execution XX% operating outperformance XX%, $XX line by in Continued costs. driven generate businesses,

to ahead a in lead decline demand. dynamics market to shifting will Looking ag XXXX,

up to the the few offset demand sales or billion Net & billion, opens infrastructure revenues mixed spending. Slide market operations to were years, to XXXX. to from mega $XX.XX up we were structural Net diluted gains for XX% our the achieved forestry per and remains of housing in income and year attributable $XX.X investments, X XX% However, projects while $XX.X Company was share. expected baseline partially uncertainty profitability decrementals billion. and hold financial with tailwinds Deere with commercial and expect last fiscal in sales the over delivering XXXX net results construction for equipment outlook also by performance. Meanwhile, $XX.X

quarter to Slide to on the fourth down X. and while operations X% Net are sales were results $XX.X for sales $XX.X Next, billion, equipment down billion. net were revenues X%

share. Deere diluted attributable or income & Company $X.X to $X.XX to billion net increased However, per

and business. our the primarily review quarter year. well as and last issues increase production of in precision starting higher fourth compared down was fourth We'll X. out-of-season year-over-year for mix quarter operating was was in positive XX margin comps Slide our spend. a deliveries in point. Operating price the results, and profit PPA to production to partially due late Net sales X% partially volumes shipment shipments quarter for to Moving points. year-over-year by ag profit segment This due that realization. billion about were were fourth Notably, with supply quarter and $X.XXX positive to price which was X segment. the The expected by to costs $X.XXX R&D volumes, primarily due the quarter. Recall by came into lower fourth by translation quarter. for chain realization lower in drove about resulting Currency favorable billion, realization SA&G tough XXXX, the offset XX.X% offset Price also in was operating shipment as sales

and X Turning fourth XX% was to due the X on offset points. Slide by also small shipment by price X. were realization. realization lower was Price to quarter ag turf billion $X.XXX Currency nearly by sales positive point. in totaling Net partially positive and approximately the in down quarter volumes,

higher profit expenses, and operating with For for The resulting to production to $XXX in by turf fiscal and the ag flip a and shipment mix, year-over-year year decrease margin. volumes industry XXXX outlook. declined operating offset primarily R&D to costs. Please and partially Slide million, lower the XX.X% was realization SA&G along X quarter, due price

We decline continued X purchases. Headwinds rates years costs, will of years. record of declining large be tempered and weighing to equipment sales ag Canada farm following in discretionary fundamentals expect fundamentals sales coupled the U.S. equipment interest on on moderating by with balance and XX% and fleet sheets profitability high industry farm healthy softening input reflecting XX%, the heels supportive to demand, strong

and small to South South cash the led sales government home of and uncertainty in and headwinds markets, beginning opposing particular, challenged grain dairy America, on protein prices of inflows plan ag Europe prices to combines to continues and early This Eastern be is Western to a after which both and announcement. be forecasted Brazil, declining single-family spending, Europe. the down industry prices from of XXXX. Dairy financing subdued Eastern commodity that bottom. In already XXXX be impact between and early to estimated down with to commodity region was delayed sales rates rates. Shifting have which XX%. remain to to forecasted during flow Western strong thanks under profitability, months by and lower expect political Coupled favorable livestock headwinds in in to XXXX. turf roughly highs home impacted Farm to down moderated by tractors and with interest in demand these is reduced with we be farm recent while from compact input XX%, about hay high slower The ultimately record with turf profitable tractor continues projected cumulative grain Europe. be XXXX planting livestock improvement demand in in rates industry primarily and steady, For rest down in X% are to with with down flooding utility in Argentina, Canada, most has XX%. retail notably be and flat interest Europe stabilizing are America, higher world's of dampening sales and in X%. moderately, industry to to The closely and heightened the elevated India, season. Across economic largest further demand abated start exacerbated the recently also and interest remain tied sales severe elevated around remains Northern equipment costs, in market segment dryness to ag are from been prices, coming uncertainty, around also risks South and offset the by the by U.S. the the and livestock half down XXXX. tractor down dairy is Ukraine, This Asia driving Industry in prices. the of dynamics pressure fundamentals in units, mixed by expectations. Brazil second continue and

segment. be XXXX. in X. net price sales forecast Slide segment anticipate our points X.X profitability. operating between on of structural ability margin is X precision Slide currency and to positive assumes in forecast the fiscal year between production translation. Segment fiscal down ag our full XX%, reflecting We flat the realization sustain forecast in small for to and gains to Turning and our XX% XX% for turf year XX% approximately ag The forecast and gives

to and forestry be U.S. just realization provides and the and margin. in the XX.X% contributed increased industry outlook. includes X are and expected higher forestry point currency Price XX%. realization positive was in net The to equipment the by over XX%, realization quarter quarter U.S. higher of costs supported be during year production fiscal Industry positive down volumes, by was the currency XX% to Slide in positive Canada net a to X both realization and to translation. on expect to while down down X%. sales $XXX 'XX Price to billion. X% XX% between operating about construction to the and X segment's price exchange is increase our in offset in for We operating be is expected points. between construction shipment be profit flat flat to XXXX and sales XX% equipment margin XX price quarter. Slide than sales earthmoving an point translation. Operating $X.XXX currency projected and of Favorable for more unfavorable over million, construction to XX%. Shifting This and resulting compact Canada This XX.

while with on interest rate be oil housing spending are forecasted current roughly strong offset our end outlook be continue around as U.S. markets Europe. Continuing gas infrastructure to While investments segment continues Slide of global investment. continued the to markets expected forecasted challenged. by Global building vary, road starts flat, are in down XX%. C&F to And non-res and around caution require equipment market be project and to segments mega forestry XX% due stable. to down spending and supports infrastructure reflective Global all XXXX sales are be markets net softening XX. to U.S., in continued be the environment,

spreads flat average less income mainly includes for about currency of higher coupled for reflecting financial The in positive The unfavorable These X.X attributable continued fourth decline let's net credit segment's to is $XXX guidance to the shift operating financing were Company offset portfolio. structural realization with sales was partially by operations market year service losses. financial was XX. for to Our a the factors adjustments, projected translation. XX% derivative to CNS. And favorable on valuation net quarter. income on year-over-year higher a ultimately, be services Deere Worldwide transition price earned and our provision Slide for margin points & and XX%, between due and the million profitability

are higher in year-over-year, by be onetime primarily $XXX lease on XXXX. accounting income year fiscal nonrepeating less XXXX, favorable expected values. offset the partially These will higher be average and portfolio a Results lower earned operating due that forecast to For spreads a gains income to residual is and occurred correction net million. financing on

guidance outlines tax Finally, income, our and rate our XX cash net operating flow. Slide effective for

to billion, income be XXXX, net year increasing and headwinds. $X.XX executional full year expected is $X.XX fiscal demonstrating For between industry pressure forecast from discipline billion despite our

between and XX%. our tax incorporates guidance effective Next, XX% an rate

range cash billion structural billion. Lastly, impacts be projected mid-cycle operations of ability our we've a to $X levels positive in our from 'XX the to formal $X.X net concludes near approximately generate now in testament is seen billion at income our strategy. This to is from year $X sales equipment close, fiscal the in flow to To executing remarks.

year topics what of the net jump went both with line for billion fourth as the key few to in year-end net Not the before like a income, review I'd the income, interest sales before start quarter we break to mark, with net you respectively. Brent, of a down and we record XXXX. but opening well only turn did Let's terms the Q&A. we $XX quarter have can finished as full billion $XX and year? and eclipsing well, the revenues to

question. great a That's Josh. Sure,

with which a orders. and backlog finish boiled delivered against the Let's as year tremendous really start execution quarter, solid the down to was year's we to the of

us enabling ag, the Furthermore, us disciplined factories remained hit on last few to our large years. we our the markets customers. In our and helping commitment shipment to some the consistently close over strong shipments inflationary presold, line inventory patterns, pace of were delivered the North the through rates with year, keep resumed of pressures demonstrate pricing factories nearly management. like quarter, meaning normal America, During in all seasonal forecasted

and story raw drove highs. the of efforts in both to we positive in precision disciplined factors production On first a an turf. direct have record execution relief in finish execution. with XXXX side, and cost Overall, making inflationary small down materials combined of incredible strong costs, result the and X year-over-year year, rein our freight some is over production come years a from This team's ag in quarter ag comps fourth for a to these saw which on time the prices, for

and books which on with normal, costs. years multiple order we were of enabling up with to our deliveries, to inflation, a revert at and we products supply customers Following challenging move saw most products Pricing meant and to we caught chains to disruptive environment, restricted deliver ultimately able on-time allocation. off worked time through expected

returned will production Maybe mentioned, here. very business. to deliveries which to factory we're is expect state second Jepsen is traditional see for And holiday overarching schedules XXXX for has highest finally think and takeaway and in construction that rates, will with farm lower Brent as levels for I we add maintenance This year back getting of seasonal season. embed the execution, aligning third the to be the production been customer that and the same, of periods quarter quarter, have factory and model steady shutdowns good first changeovers, primary the here production we'll patterns, much use meaning the the required the equipment. Meanwhile, during allowing

to year, similar last expect down the points guide. XX% to quarter year than basis to So top first full we sequentially; XXX quarter be and to lower the be first XX% XXX for line to margins

a And question, been is of mind seasonality, segue to That's next great been for use today. is reminder the color, perfect top a guide trends future speaking years a expectations. Brent, everybody able probably Josh. seasonal which on expectations, as my It's future few we've and this since thanks into for for of

Our I a dynamic markets here, But segment to will XXXX unpack expect more we could you geography? and through next there's be maybe Brent. walk bit by know us what that would a indicate guidance lot year. could

are remain years. are record bolstered here. we with profitable record don't North forecasted with in levels. Fertilizer start land part last half few be albeit levels down from Thanks, Why remain experienced sound be a XXXX. Similarly, while margins balance now the impact in still and in but lows, are into commodity Lower to commodities. America. cash expected by to And to debt-to-equity to XXXX, in lower fundamentals lot prices customers lower, ag last trend receipts the corn cash thanks from the third historic expect remain Farm is we multiple highest Josh. above example, below Definitely decade. costs, for value. costs in at soft sheet of prices farm down of of for highs in unpack of back large crop still XXXX soy years said, increases from net input to That will some the are the offsetting highs continued XXXX, income. Farm ratios heading

X a still remainder still, some prices is yields a certainly expected, could weighing during supportive even interest puts at mid-cycle on fleet of coming There's Finally, rates lot healthy but that the takes lower better are which equipment discretion than dynamic farm this the to years North next demand, levels, of calendar buying equipment of the replacement cash of fundamentals used decisions, higher will margins replacement after in volumes. And and year, volume environment equipment a creating are for on tax American are takeaway more and commodity for the customers year. drive year. have little but more CapEx

early bag turning a I'll products. an in sales give perspective. by Now with really see To to mixed XXXX. We little equipment a color, our program start results order

flat flat call, precision quarter third planters take strong making the higher still are up -- were by ag mix we model with on for some be compared and to care strong, products, XXXX. year-over-year on early ended noted our and which previously program will post-season shipment year-over-year XXXX, our bolstered order to equipment when rates. And deliveries or making will a minimal orders larger XXXX downward year As sprayer volumes up revenues put in early will crop while be pressure for we

down finish not early until digits order November, to to compared the While we program does our double of expect volumes combine XXXX. be end when

basis. tractors order a manage rolling we Finally, on book

the line through levels third restricted reflecting Meanwhile, similar Our are out tractors production product of are availability sold XXXX. continued of row for end to the quarter XXXX. orders crop X-wheel the in demand second strong quarter, most and tractor the booked through drive with

Okay.

like our the an guess that going it gamut from running reports are into the positioned I lines. we full EOPs So sounds question. product are inventory across next How perspective? year the

year-end for and ratios a in for did X-wheel demand. sales tractors at job X% with XXX-plus XX% in North combines. production put just drive teams America X% to horsepower managing tractors, new retail Our context XXXX tremendous for equipment, in for line that the To are inventory

demand line inventory volumes. an -- combines, this inventory for job retail XX-year have XX% inventory XX-year intra-year in nearly well from the horsepower year year year below still is XX% they in Take market. Furthermore, the ending example, fiscal below fiscal dealers high average. the again May for North amazing down ending positioned done with average. managing American used are while side, to its on We produce recovered down used XX% high from have and And lows, the historic about tractors are proactively

really next for is than markets America to So in feel the North end bit good replacement inventory inflect all, managed as from which we basis, When prior XXXX about all in important much starting compared inventory we've an cycles, position really ever year. before. tighter a

This is Jepsen.

We've them Just and the and from large comments as things flow. here. prior Well, to on and on demonstrated to ebb inventory. on ag how know markets North cycles American Brent's add by through learned manage we control, execute

great hear, to at That's pull Brent, I'd thread second like And just a on view Josh. actually hinted to ago. a

imply you Our for in compare we're how demand replacement relative XXXX. would some markets Could guide positioned to that prior periods? today modulates

in distinct different a replacement Absolutely, prior really North the there periods make that market. are American period few variables this from

we've averages. remain First This significantly long-term levels, talked already is ag large below inventory about. which

are XX% XX% year. are In both new below below And while and drive horsepower combines fact, for same inventories that XXXX XXX-plus tractors X-wheel tractors levels.

was tractors Secondly, with roughly significantly in the to are above while years XXXX inflect have X today history. line age downward in large remain youngest nearly older meaningfully. mean yet Combines is in the than and the fleet fleet when recorded averages, long-term

of the amplitude cycle. age Importantly, a higher the fleet dampen helps

much farmland and driven Additionally, seasons. values by of years profitable farmer higher balance today, sheets primarily healthier are

the to higher farmers. we leases, here options period. The discipline portfolio X- time, our of decreased really eliminating which pivots message the Finally, company leasing and few positions higher rates, Deere, is in short-term limited prevalent that the the remain the production X-year years, from to with At interest demand combined of financing size options in levels leasing used with as last inventory for same inventory key terms, better well the to XXXX even XXXX constraints drove XXXX.

things Two is This out here. Jepsen. to point

do, where ago, First we today replacement managed we'll but a we the focus the decade we and a past. than work know cycle have we versus Certainly, company that to are is to different and execute. better we need have

deliver that profits differentiate farmers greater and help technologies, their second much market. cost our increasingly now is to it which global an help in operations breadth ability can than solutions around past. in a reduce today Farmers precision The have ag of new increase is the competitive was

happening Okay. Thanks, we America. a of shift time North We That would of to down now on a ton America? over walk you through sense. Brent what's there? makes bit Josh. us and Can spent quite South Josh,

Of course.

start been much I industry And it's of think happened market number best experienced a faster very the temporary much with the is has than earlier. which our mentioned to in We half you Josh dynamic for in as expectations demand second noted, Rohleder, headwinds. driving 'XX, weakened with we the year Brazil of what reasons of 'XX. a for expected

down to and combined XX% large about retail volatility in For sales experienced. we we XXXX, example, XX% the half demonstrating saw of close retail the second tractor down is

XXXX. up levels. industry, planned, us will our though with target than we, inventory next underproduce back reflects production back building inventory result, and the Therefore, to along guide rest pulled As ended bringing even XXXX we in demand of year a the more we

due region, offerings our the production to building sustainability responsive and and more for Importantly, resilient profitability in continue handle the all integrated fluctuations. in we to invest producers market while the tremendous productivity, business systems the of a across to potential market drive to will

Okay. ag dynamics now the let's finish Europe. Brent? Thanks, over up Josh. there, side the on with And are What

been While consistent more markets volumes already be expect the we a no down will a other XXXX and remains discussed. Europe to story, next bit different. we've relative be to It's year, stable

able positioned large -- demand combines. heading and tractor did finished production while across tractors While demand we We moderation accordingly large and into to were well mid manage XXXX. feel see strong, tractor

continued to full, for executing And industry first a Ultimately, line we in our market demand. Given with competitive orders through books strategy to in headwinds order visibility the expect approximately business we in the -- this line XX% environment, the be with year. most gives down remain industry in with us half of Europe. committed XXXX of the

remains on offering differentiated through Our to focus adoption. increasing precision tech customers value our

Thanks, Brent. That's really helpful.

XXXX the through following with still rental you secondly, lot and to to being XXXX? yet infrastructure And expect Let's down for year. guidance constrained then re-fleeting about is heard we what's of shift fiscal now production, see to we've years in mega story come, what dealer and going X C&F spending project should walk Can there? of a on us a next

bet, On caution strong you which office around guide one given elevated as interest infrastructure, rates. are noted and and have You our in earlier, some you Josh. markets sector, offset the end hand, commercial by and residential

than be U.S. the other a broader we government U.S. as pace mega for where and in which consistency the investment for at most is seen has albeit both Wirtgen did the another funding, timing faster and to predict built to we've solid driven road manufacturing, significant, you XXXX. inventories, the in On year hand, building respect federal inventory field Group. With will systemic have these industry expectations local on projects hard in

did from we we trailed While the the historic inventories of industry. XXXX, still low recover

XXXX. Market business. decision our doubled the years have a of -- areas dynamics our concentrated From designed which years. is that in by develop we of road business margin really X last just margins aside, a excellent excavator, ago, end Wirtgen, we further an industry to we've today market, inventory focus on acquisition building gave Deere were our we'll in to nearly So further the few build better pockets than few of a structurally us build evidenced which the to are exposure a accretive

like us now an margins be of looks on I'd & another our and reduced paying tech we performance. C&F historical focus see decrementals where stand various the to switch you to we dynamics, Gen the could across update The sound X display the into Brent, give really market latest That's and to to model business our Spray, stack. off high system? our execution over year operating autonomy helpful business of and the end relative insight See as Brent.

Act across some product Technologies, we can successfully Sure. in the tech & much down Spray sprayers. what We've year See entire Spray, launched applied See See & way Spray year as upgrades. big or have the Ultimate With to portfolio kit, & this to focus for our release retrofit all strides significant made is seen payment with model solutions of which Premium, of refer model limited Sense our retrofit we year on our precision on be XXXX XXXX interest and our which back the &

premium Solutions push XXXX, as model. base targeting a into significant supported the are a installed by We Service our business in for

& paid acre Meanwhile, model upfront installation value. with a by See and monetization Spray journey to For Premium, autonomy our acreage customers' per aligns minimum, with we've capital in use our a is for expansion plans XXXX. kept our pilots that for the through nicely followed hardware our progressing cost

training, new technology precision mean time time, autonomy retrofitting us really through substantial the key utilization accelerate a first between uptime we for back. seeing broader tries to opportunities out of with for when improved installed base the and started positives. The is significantly generated set like go our without pilots progress will What tractors. for our here XXXX customer in they that commercialization reductions Our in insights model up in false KPIs year-over-year interventions metrics intervention, while

their the display, and with the cycle is add latest key required with which farmer our of farmers is equipment, more coupled to value production entire features tech another receiver experience regardless of systems track to less helping and in a Gen equipment auto gains to customer through made decade reflects have to new that of unlock So life someone productivity is as key do. adoption helping farmers in operators solutions. of our utilization, significant model our old. This innovative precision a across This would is here X StarFire easier to do the can business productivity years Overall, display tasks modem, stack focus continued and investment example commitment fleet on basic the and step and tractors historically seasoned our transformation a than delivering critical age. section and control enable such

really in gains commitment the business looks investments all That's continue innovation. we demonstrate to like extent, And stable in strategy To the through-cycle over we've that profitability it to structural exciting, with the maintaining Brent. cost our achieved put in years can across Brent, cost already last significant XXXX? effort business. costs few thinking how We've management we're management share the XXXX. you diligent about reducing requires noted But into we've the for

That's really did the question, all Josh. we raw inefficiencies. low-hanging declining a freight job premium about costs, getting XXXX great to at a was disruption-related a good material From of fruit. bringing out decent amount

costs, opportunity inflationary and forward think show focused continuing see well substantial time and across begun material an small freight. tackle our ag costs ag already fourth extent. both indirect quarter we material on driven direct turf, remain to there's look in to as logistics and into The -- first financials as we precision both we As these impacts and XXXX, primarily to and by primarily positive for flip we've up and seen the production production overhead. We've and was

Our favorable XXXX guide implies that slightly production costs year. full for overall the be will

our acute more component and our many realization cost partial and important cost becomes indirect moderates especially the levels, as well direct price logistics improving increasingly of rise the on continued as reducing labor position. The becomes normal to given cost As costs focus maintaining across in materials an focus to markets. our on our

ability few customers. the care come success out of been clear there priority to is taking come maintaining our across One make teams. over run a just changing this past to is of the to loan Brent's lot thing a overnight hard comments costs These of to don't takes one of This effort work add the operation It to the Jepsen lean manage our environments, our Part from while business work group. Josh of and years again. of board nor our the they happen. of has capable adapting quickly

focused Our management, as see we'll efforts on expect these teams of move benefit and we I remain forward. the cost

my had And from And talk Great. Okay. might cash capital a in we in then and expect cash final Josh. to perspective. We've back you allocation flow question Can a you, priorities significant year is 'XX? our what about XXXX? use of briefly

line Sure. in excellent credit which our Liquidity, us remains single us our flow to to We reinvest on rating the in of XXXX, good conversion execute diligently A saw business. in plan well than with allowed allowing being never all shape, the investment has next has business. in in along cash positioned This priorities. level and R&D a continue to maintain today. Despite particular, our we XXXX, In to year. top down organic similar investments guidance in we been important more inorganic are

to years increase year, confidence dividend our a year more business in our billion in able this today nearly with nearly structurally the profitable than $X.X reflecting we past. And in by we're Next, XX% share repurchases. finally, completed

returned execute we the XX% Over dividends of on committed we our we cash. X strategy, have buybacks. the And last the nearly from and disciplined operations years, shareholders of to cash remain to via equipment uses as

Thanks, Josh.

share? any do before up the final open we you to Now like line questions, thoughts have you'd for

us Yes, truly be that great. would for phenomenal been a year in It's XXXX.

from of some executed challenges recovering Our production the XXXX. in well, teams

of also our on the customers focus driving things levels we to earnings of focused restructured addressable and incremental cash shareholders. Since and a unlock in to for investing setting the We mirror value organization. key business X margins, entire results. income autonomy our and delivered to are share returning via we This the on new the significantly As result, systems on production profitability enterprise empowerment the in improvements year market. XXXX, ended structural while net per which

to our the leverage reduce tech increase centralized we speed development and technology Next, redundancy. enterprise, across

in throughout lives easier their unlock, us and Third, an while less. for as we cycle making deployment serve organization create create embraced we a to value-creating and our grow And which help them our development greatest solutions. the customer we didn't customer value-adding lastly, stood customers and serve value technologies. We're our life with more better exiting that focused are customer products and product optimizing accelerating on confident margin-accretive capital disciplined significant up lines a strategy some will result, enabling markets value portfolio, do when create to And included or turn and and of solutions. business of more value, we our the jobs framework allocation prioritizing entire opportunities we unprofitable

our Our mid-cycle sales equipment levels. being right around guide XXXX contemplates for operations

our mid-cycle of to achieve a of As the combined with income time frame. It's than our XXXX, X.Xx were we'll structural near while important level net continuing margin the improvements, note XXXX nearly in our businesses the to CapEx deliver result that cycle profitability last in and operating important will execution, time the we business this differentiate life and than our R&D customers. services in And at the past. solutions very to continue investments transformation. Fundamentally, the protect level and that are new remains history. and we further differently we most invest product-related in company's the our in products model Xx highest

levels runway higher opportunity in our As to ability of deliver still through date, a higher confidence are our result is strategy our us and in to significant all of the we've customers of over time. stakeholders business. The decade. the which lead to enthusiasm of and lows highs for executing ahead the unlocked This the performance of and balance in while strategy in greater for than opportunity us cycle will variability our dampening we've the to us, front gives produce through and confident our taken higher what these in of returns we actions

Thanks, Josh.

questions it open to our what let's Now up have. investors see other

portion are -- ]? the Sue procedure. ready operator polling of will Now [ Instructions]. The instruct Q&A we call. we on the have all begin the you now to [Operator

Instructions] question Jefferies. with Volkmann Our is from [Operator Steve first

a I might I've through few you of bit. be like historically, line around of the cycles is have guys. thought with calculating giving. okay, there'd more the I'm cost pull I be that that's but been side to that it feels My levers should of Great. a kind a sort guess, opportunity decremental. little guess I of the mitigate that I you're of kind top some guide XX% side guess, you to to cost kind relative for this. maybe question, on there

around hear. to that? thoughts love I'd any So

Yes. question. the Steve, thanks for

sort Regarding profitability of business. our for cost management of the embedded in the level XXXX structural and

perspective. from top our that profitable see a markets down are You'll line of most some

XX% for number starting agenda be come but the remainder years down we'll quarter. in And see ag We're executing quarter XX%, and XX% decremental. the significant I look our that we've already would to management time, that's cost XX fourth in of fourth play. a will towards I a So at where as tailwind of production of at maintaining the to we've of precision while for same to in see the pleased there's a we're serve business. And our be made as mean the of the seen execution actually some production costs 'XX. in the we deflationary disciplined quarter sort into say become progress a first

a a possible, some to -- the neutralize cost of goal all that actually the really next cost to from us. drive of is production for cost production to inflation deflation perspective in where extent tailwind the and possible, management Our year

the you most same the chain, while focused, term, in base our work designing supply also longer equipment. If think of will on the time, the at of increasing we're cost reducing areas some where about it's over cost our around resiliency really out supply in

back And look if almost freight more we about down and all which area XXXX. freight we'll that focus. that material so back sixfold Those in raw in we some costs, both airfreight got seeing us the trucking to really forms and be another in us. course from tailwinds of opportunities our come and will to XXXX, well. think back tailwinds saw over will across of we're logistics have be expense into that in as then increase of break We for of XXXX. subcomponents, of half we were go the down And the that continue get year, during half XXXX. back of ocean, I And logistics 'XX. air of rail, that And we for to

expecting described? -- of decremental, all be that you goodness those that pieces to you're just you're of XX% kind clear, just And within expecting that

Yes. Certainly, our with There's guide would activities certainly continue to contemplate control and for achieving supply be XXXX. further further opportunities reductions, management and that's cost already to included to decremental. in decrementals going our XX

is, it's 'XX compare we've I we at or mid-cycle, you, add been which to mean, Josh. I be. around back thing if thank Steve, will Yes, when we're would periods projecting One

about Our greater. X.Xx margins will be nearly Net income double.

So delivering to where we're decremental at. and mid-cycle, from think mid-cycle good mid-cycle a if perspective this about in you being significant around improvement profitability. feel about We

We good But methodically a about X, have working we see to at forward know years. from opportunities where and shift But X even we through. need We just, keep work through those. perspective. benefits last guide it, And those to we see as we'll the feel we're we'll significant execute, come execute. structurally, really, on, call a

next question with Our from Stanley Stifel. Elliott is

Can year of implied Just end you of pricing kind you we 'XX? help the the the Help bit be would of -- little off kind this coming compares. any maybe provide talk with about us year about into exit Are of pricing? a X%, or roughly difficult negative great. or is rate that talking next there can

then X.X both and a and pricing for SAT. PPA our point regarding C&F about strategy points Stanley, for we'll be for at XXXX,

X carryover year early to the all in the remain positive We segments. we will expect see would year, but some entire for

does return of forecast retail discounts. that some include a Importantly,

what price for us with net most exception. -- incentives. And strategy net is our Brazil XXXX. a our controlled is position, again, inventory markets, realization in being figure, pricing the most notable inclusive of think that protect I really we've In markets seen only you've So maybe helps which

any negative the XXXX. segment course So of we wouldn't expect go through to see

next with question The Fargo. Wells Seth Weber from is

if see your your segments just -- expected for the growth be you bit P&PA to wanted decline context of is give to decline. to little guidance your where could bigger and a industry the be is expected than around I other

would the for, why you're end markets. industry maybe what underperforming, that contextualize could just you calling the If be for for us, year like

to you, too, Seth. Thanksgiving Happy Yes.

XXXX our relative guide able really line and -- our differences ag. have slight will to retail seeing our demand slight difference financial in precision as retail Regarding with work guide we segments, for North Brazil, ourselves industry lower broader notice we XXXX, in demand with to to between guide levels levels really In maybe a market. positioned our you'll where targeted our we little the underproducing produce you're financial some bring our starting that industry to is forecast, to where guide, of a particular well, for back be production due we America, inventory be bit will than

guide for really what's that's affecting precision our industry to the production of financial So guide ag. relative

the tractors, around be bring to also market little levels single-family we'll rate of ag That can story interest housing by underproduction utility to year compact another bit. relatively small a For small be tractors, slowdown to the be our and sensitive turf, there increases. continues continues where to in and down back affected see inventory starts

that the and And I be so, rest for continues to to the ability line say, yet in slow, XXXX. as we'll ag year in end market have industry. of underproduce would with largely the turf, another we'll small produce

the construction a to little forestry, there bit As is it relates story different. and

pace industry You build at not but that certainly XXXX. in inventory, inventory large the We at the saw build did did. the some broader industry

inventory a an a come happened will but lesser further it And to may in in extent little so XXXX, inventory what be build have build yet that than XXXX. we to actually

there. the will year-over-year volumes drive shipment So relative lower that industry to

about, different the talking story little guide we're depending reconciliation So bit financial of broad segment our what it's on the -- the reconciliation to industry. that's a but

to well that Maybe different side, the Yes. reiterate position ag prior Seth, the in maybe thing we've than -- Josh. add, America to the managed very on just this one cycle. is North large and very

for highlighted that's earlier, end done on I X% side, as on forward. think both really build used retail go but positioned, new example, we mentioned, in the work and But both at new been of combines, new the were inventory Brent sales to it we the with line inventory as the well year.

drive tractors, XX% row For or like on X% crop. something

supported dealers has we've market. and side have really well the positioned activity proactively, done positive been you think through when use biggest and new our the that what about us then both So working and

next Tim The with from question Citigroup. Thein is

heard earlier later, production then are coming back -- guess costs. 'XX. more that favorable But production it like the I the of be bit to to on just Maybe in for a comments overall say maybe the you sounded I expect favorable. company But it pieces cost you to it's that expected that be you of And clarification. thought there a I the

by on that is you plus provided for a you the to expect EBIT page Or the side just correct? same production as we're terms in 'XX? be that? So that Is the I Did segment, of on the that cost not? throughout bridge company mishear whole, that

Yes.

be moderately are be Regarding to XXXX, slight net inflationary. tailwind, we year tailwind for flat say, year, subcomponents debt, XXXX. I that our some there a costs, should be the But in production would should positive costs within next contemplate production still to costs guide a will production

we the in and come from further scheduled for -- largest inflationary reductions what labor freight to we seeing expect labor bucket that many tailwinds the the us. XXXX when Specifically, of within compared would to have step-ups within XXXX, our year. we're and material have And the would be production is factories contracts cost do in item

in XXXX, bring to cost guide again, deflationary production total to does those offset to have we'll our contemplate. state So a which,

for Yes. short, expectation our I be for cost mean should is in current production up in add Tim, costs, they 'XX. production green those you bars

with Kristen Owen from is question Oppenheimer. next The

I the capital on broader to Thanksgiving. ask wanted allocation. Happy

Just operating cash given than greater in conversion XXX% XXXX. guided got you've flow the outlook,

So my is question twofold.

influencing XX% projects? And internal cycle those mid-cycle. we How ratio then prioritizing the spend think on on should XX% and talk about at you investments. touch to the externally, dividend about next First, outlook given Can you're technology the that the through payout your maybe the how dividend year?

Thank question. side. Josh. start for R&D you the it's with I'll Kristen, the

we're from perspective. R&D yes, be So up an -- we'll slightly

principal mentioned, significant that Brent a technology talked about this month a more. talking all technologies dealer across as production enterprise every many from we're well. & And and on Act over what as systems, there have significant year bringing So across doing saw be good And crops out and about progress here autonomy. there. with we're to across ago. last different he opportunities we and week portfolio, autonomy, customer of being And the we $X.X continues a A the opportunities talking billion our Sense tremendous we there. We're amount to spoke or single perspective asking -- customers focused

the appetite challenges the customer there know labor we being by and faced base. So our

coming have course And new the product significant also and real. hardware So we next technology of couple development we're years. of the over that integrating remains very some

R&D cost talk And for there's we've focus we're you've about So solutions emissions as a continuing and think going for an in on that. us about to sure. propulsion amount space that and are tremendous customers, reduce heard perspective our from alternative that of before, reduce to to got focus

we've it it taken we've up As to mentioned relates XX% year. the dividend, nearly this

I have think going. we that confidence we're underlies where the where are and we in

our in to of execute it to range. payout as that over As relates the the to move. we continue the That way range to We're we to bottom percentage will continue still and time, working that our recognize range way are.

expect in I we our can the and use inorganic all and as to dividend something we actions is And deliver cash all, to likely to of term, handle well investing of we'll there. the think value-enhancing priorities long business, as the repurchase residual cash using organic drive the given cash in generate, we we shares. as would from over that we say, profitability. But structural all continued demonstrate be chase So able

is next Jerry The Revich Goldman Sachs. from question with

you're thinking prior at inventories the large just ag? they obviously, the to inventories in unpack in in that but used rising hand Happy level cut the balancing because low will the production inventories cycles. did rapidly are Nice of XX% drive out off could absolute got a to in used And how used bottom. see I'm Thanksgiving. the wondering production cut way business before XX% if we

you're XX% the So to production be versus thinking that. us going on hear modeling your get to where to we to of build. the further needing to used XX% comfort cut would I all of based level need is love cut what's if continue inventories to how that, about

equipment puts of short production of takes during constraints those on But have time. period that we the about production as we to in to year. cycle And think the next as Certainly, we'll the Thanksgiving large during time that benefit -- some over I 'XX. Certainly effect Happy like 'XX ultimately, the dampening of we constraints net and think the at the a And industry amount there's XXXX, new we of constraints benefited and for from couple well. you limited industry a an that as and period, didn't a a fleet that introduced faced itself. have years. see feel

'XX. part used, As used 'XX significantly have of the get it in years and those relates to we during seen lean depleted first

phenomenal where XXXX. started come of historic keep to back proactive used part dealer of used below response in is inventories the those inventories well this Some early those engagement have of terms been really the up has their to target in And averages.

balances back OEMs that Part in we incentive at dealers within the also cycle. there increase think, coming at back here used tractors that look the is historic Deere changed spend industry 'XX. was, below we cycle. proactive, again, X we've to below of used inventory We on that we John but and the our that leases of were some XXXX average of machines how so of around other end large I manage And 'XX just of and and then And were, some XX% options to the dealers our I did used last engaging was produced something around in to average. half that go our story lot XX% that XXXX, the short-term back X years, and inventory. the help historic at saw or the of think exacerbated being the and part combines the of a to relative leasing

new to management with should better inventory think we as be of in so And that intend new relatively side. and combined new year, We next into XXXX. used going produce for balance the healthy line on

is with next Wertheimer Rob Melius Research. The from question

to decremental just circle in ag. margins to wanted I large back

precision mix of cycle? Is you do actually one? you segment that a a like if headwind how more production that is negative any that Is versus XX% some like if of others? shift program a on obviously, the interpret differential, versus of in that in curious how interpret And any down the that kind there's is XX%, specific But or was the within time? there there not early curious difference. combine -- is sounds I combined kind think I I'm order what's huge R&D? Is dragging what more margins the outlook?

question. for Rob, Thanks, Yes. the

year, think our I -- decrementals Regarding a number next get things consider. there's of I for to mean,

seeing are decline in our We volume a shipments. double-digit significant

flat somewhat time, to While held R&D through investment same cycle invest intend we've at as we a next little up here. consistently to the relatively bit our year

had As a the decrementals, little profitability that's in our you think the approach with mix years, say, headwind impact seen down North Brazil I last And bit few about sort margins. of would group the there. we've over negative of more that's having our mix a certainly average, in combines than certainly America

really that little the being our of segment average is than And where down because bit a so is management And mix us maintain traditional our market a in do to is why more terms combines, to entire otherwise. Specific on difficult that this also decrementals would headwind. focus helping slightly a shorter be down life have useful with group equipment. the pieces other farm is than of those mix segment, it headwinds, than cost of more combines

X fleet than now, combines age down about so with years, averages. long-term we line more over the is X the to last come And in fleet And tractors. in the saw right age

decisions their given And year. so I into next going little a that's CapEx on producers more combine think discretion

add. will -- investing we expect scale. our that we like in go-to-market deliver Rob, stable also that we're business plans Josh. mentioned is and the we at One same the build great model of that grow R&D, question. At transformation business, as margin parts Maybe more out how there. and thing Brent Yes. time, and This the on Over drive business to time, better

benefits decade. we're the in that through the in the and knowing it, balance as term, go building the we can I investing near that think deliver here of

we time last Thanks, Rob. And for have think caller. Sue, I one

question Mike comes D.A. with Shlisky from Davidson. last Our

Happy one. Thanksgiving. a It's simple very

X a being mid-cycle segments Just for I be as look where I to should this each XXXX. expectations about margin a at in fiscal all well. XXXX? on for be year more mid-cycle segment granularity to it your a are guess mid-cycle The about want little also know, a comments

and whether other your Just mid-cycle thoughts kind one. below balance by out of will segment the be of kind on or any above

you close Happy segments as Mike, somewhat I broadly to Thanksgiving say would mid-cycle. to well. are

is think at running Construction I in and think little a the production higher as And closest. think we long sort a that turf similar the bit about of directional across precision forestry structural bit ag I small ag is of little a period measure and probably for and profitability, there. us, lower, the cycle breakdown time. we points

us, look for XXXX would as a we proxy compare XXXX year the the for around of were And running so that mid-cycle, volume. our would at we level businesses good to last same be

And so not. given than them as example of closer it's volumes. mid-cycle net that pleased the can X.Xx pretty the mix, generate like we're are at a We of can And these levels. income deliver to we what we mid-cycle good at feel most

Josh. is this Mike, Yes,

I think Brent add maybe just to on mentioned. what

deliver at how than I here fundamentally in performed can what we we the is here, mid-cycle past. think different importantly near

income, about net billion talking $XX EPS. $XX, we're of So $X roughly of

better in and shift because significant You we get a saw we of you a time. I how mid-cycle. how point terms back we in can important think than to, compared that performed that's And 'XX. period compare Obviously, often are seeing well do that we to XXXX, in perform significantly you're

would cycle, of we implication well. better bottom the perform in significantly than the to think is I past have expect at we the the as

the both around the manage about for opportunity an Deere. ability not volatility value technology for operations for because from well So create in It's cycle customers through for us. customers ahead of just see as we're to how growth reducing we excited more and we their as opportunities

tremendous room a of continue the us amount for there's So balance of the to improving. decade over

hope have you all Thanksgiving. everyone's a today's call. and concludes We That appreciate great time

you. conference. That all you today's Thank participating. does Thank conclude for

disconnect time. may at this You