Deere & Co Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jamie Cook - Truist Securities - Analyst : I guess just my first question or my one question -- I'll get back in queue. I was surprised you guys were able to raise your price assumptions for 2024 in precision and production ag to 2% from 1.5% just given the fundamentals. So can you talk to what the factors were behind that? Any color on pricing per region? And does that include discounting. And just receptivity to the price increases you announced for 2025? Thanks.

Question: Angel Castillo - Morgan Stanley - Analyst : Thanks for taking my question and congrats on a solid quarter. Just wanted to dig in a little bit more into the construction segment. You talked about implementing an underproduction strategy similar to what you've been doing in ag. Can you talk about the magnitude of that, how much you're planning to under-produce? And you noted I think rising inventories. So as we think about how long this can persist, do you anticipate to for this to be continuing into fiscal 1Q or 2Q and just what the magnitude is that you think you need to work through in terms of underproduction and just how that maybe relates to your ability to get price in the next few quarters? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 15, 2024 / 2:00PM, DE.N - Q3 2024 Deere & Co Earnings Call

Question: Tami Zakaria - JPMorgan - Analyst : So I wanted to build on the pricing conversation. I think you mentioned 2% to 3% pricing in the EOP order books for seasonal ag products. Could you share any comment on what you're seeing on the construction side? Are there any orders in the books for next fiscal? And if so, can you comment on what pricing you're seeing for that segment?

Question: Jerry Revich - Goldman Sachs - Analyst : John, in the prepared remarks, Luke, you mentioned this as well the focus on keeping this downturn shorter than in prior cycles. I'm wondering as you folks look at the moving pieces for '25 that you shared with us on this call. So sounds like we've got headwinds from weaker demand that you laid out in the early order program. But we've got tailwinds from underproduction of $2 billion of dealer inventory destock this year. We have list price increases and it sounds like there's some cost takeout opportunities. So I'm wondering if there are any other moving pieces that we should be keeping in mind as we think about '25 as consensus estimates have earnings is essentially flat '25 versus '24?

Question: David Raso - Evercore ISI - Analyst : The [spirit] of the question is related to how to look at the fourth quarter. People trying to figure out what's that run rate annualized, adjusting for seasonality. I guess I have a question, but just clarification first on the fourth quarter. The net income guide for the year implies EPS for the fourth quarter around $4.20. But if you run it from the business segment level, it's more implying only $3. So I don't know if it's something one-off in the fourth quarter, like sometimes it's the nonservice pension income, right? When that's a big income flow from better asset returns. It's not in the segments, it's another, but we have the tax rate guide. We have all the segment guides. We have [finco]. So just given the importance of how people are looking into fourth quarter, what's that $1.20 EPS gap? And the real question is, are -- we have the fourth quarter, we have a lot of shutdowns. Can we still think about the first quarter of '25, the second quarter '25 in a normal seasonal way for large -- call it, global ag, right? Global ag is usually down 20% first quarter versus the fourth, and then it goes up over time. It's like 50%. Is the fourth quarter in that similar pattern? the setup that we should think of it as down 20 in the first quarter and then goes up from there or is the fourth quarter so low, it doesn't have to go down sequentially. So that's the spirit of the question that fourth quarter number, just the clarification and how to think about normal seasonality? Have we altered that with how deep the cuts are in the fourth quarter. Thank you.

Question: David Raso - Evercore ISI - Analyst : And the gap in the fourth quarter? Oh, come on, the gap in the fourth quarter. What's -- clarification, please. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 15, 2024 / 2:00PM, DE.N - Q3 2024 Deere & Co Earnings Call

Question: David Raso - Evercore ISI - Analyst : We can talk (multiple speakers) but it is a pretty big gap. Thank you.

Question: Kristen Owen - Oppenheimer - Analyst : I'll do a little bit of clarification on some of the prepared comments and some of the Q&A afterwards. (technical difficulty) to understand the inventory to sales ratio in the third quarter looks like that was flat from 2Q. Just help us understand the difference in end user demand versus this production declines. And then how we should still think about building to a target of 10% inventory to sales? Is that still the outlook? Just a little bit more granularity on some of those comments that you made on the inventory to sales ratio. Thank you.

Question: Joel Jackson - BMO Capital Markets - Analyst : Maybe drilling down more into your See & Spray early feedback commentary. Maybe you could talk about -- you talked about how your efficacy, the ROIs are hitting, what you thought, and some of the early days here. Can you maybe elaborate on that? What are the components that you're really seeing that are working like you thought? What are the lessons you've learned that maybe you've got to work on and do a bit better if you get some real experience with some volume?

Question: Mig Dobre - Baird - Analyst : Just a clarification on inventories for me as well. If I look at your slide 15, where you discussed Canada and US inventories. The way I'm interpreting that table, to me that looks like your unit inventories in both two-wheel drive tractors and combines are flat versus a year ago. Do correct me if I'm wrong here, but if that's the case and I understand it correctly then I'm curious as to how your production cuts actually flows through here? I mean, is there a natural lag that we should be thinking about and maybe think about what you're going to report next quarter or Q1 of '25, how should we think about these metrics given your production cuts? Thank you.

Question: Chad Dillard - Bernstein - Analyst : Just had a question for you guys on decrementals in the fourth quarter. I was hoping you could frame how big the under-absorption impact would be from under-production across (technical difficulty)? So for example, production and precision seems like your decrementals are in the 15% range versus a more typical 35%. I was hoping you walk through those moving pieces. Thanks.