John Deere Financial profit plunges

The financial services division of Deere & Co. reported a 29% decline in net income year over year in its third quarter of fiscal 2024 as provisions for credit losses skyrocketed. 

However, John Deere Financial posted higher YoY revenue, and forecasts a 16% YoY increase in net profit compared to fiscal 2023, Josh Rohleder, manager of investor communications, said in the company’s earnings call today. 

“For fiscal year 2024, our outlook for net income is now at $720 million as benefits from a higher average portfolio balance are expected to be more than offset by a higher provision for credit losses and less favorable financing spreads,” Rohleder said. 

BY THE NUMBERS: For its Q3, ended July 28, John Deere Financial reported: 

• Net income of $153 million, down 29% YoY; 
• Revenue of $1.5 billion, up 21% YoY; 
• Net financing receivables of $43.8 billion, an increase of 6.3% YoY; 
• Net equipment on operating leases totaling $7.1 billion, up 6% YoY; and 
• Provisions for credit losses through the first nine months of fiscal 2024 totaling $212 million, up from negative $67 million over the same period in 2023. 

The parent company, meanwhile, saw its net income fall 42% YoY in Q3 to $1.7 billion, with sales declining in the following categories: 

• Small agriculture and turf net sales of $3.1 billion, down 18% YoY; 
• Production and precision agriculture net sales of $5.1 billion, down 2.5% YoY; and 
• Construction and forestry net sales of $3.2 billion, down 13% YoY. 

NOTEWORTHY: In Q3, the Deere & Co. Board of Directors agreed to sell 50% of Banco John Deere, a Brazilian financing subsidiary that’s part of its financial services segment, to Banco Bradesco.  

“This strategic decision reduces incremental financing risks while allowing for continued investment in growth in the Brazilian market,” Rohleder said in the earnings call. “The transaction is expected to close in the second fiscal quarter of 2025.” 

STATE OF PLAY: The company attributed declining construction sales to challenges facing the residential real estate market, including high interest rates and a slowdown in single-family housing starts. 

“This is compounded by continued declines in multifamily housing starts and persistent weakness in the commercial real estate sector,” Rohleder said. 

The company anticipates continued declines in agriculture equipment sales due to diminished farm margins and higher used inventory of late-model-year machines, he said. 

MARKET OUTLOOK: Shares of Deere & Co. [Nasdaq: DE] were up 6.4% from market open to $373.60 as of market close today. The company has a market cap of $102.86 billion. 

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