Deere & Company (DE): Margin Resilience Amid Revenue Contraction and Rising Leverage

A sharp revenue drop, still-high margins and rising leverage define Deere’s latest cycle#

Deere & Company closed FY2024 with revenue of $50.52B and net income of $7.10B, declines of -16.15% and -30.16% versus FY2023, respectively, even as gross and operating profitability remained elevated. At the same time the company deployed cash to shareholders — $4.01B in share repurchases and $1.60B in dividends in FY2024 — and ended the year with net debt of $58.14B, leaving leverage and capital allocation squarely in the spotlight. The combination of a pronounced top-line retreat, durable margin structure and aggressive buybacks creates a nuanced cash-flow and risk profile that will shape Deere’s near-term trajectory.

Those figures come from Deere’s FY results and consolidated statements provided for the 12 months ending October 27, 2024 (company filings provided). The headline is simple and consequential: the business generated substantially less revenue in the year but retained high margin performance, which underpinned earnings and enabled continued shareholder returns even as net debt rose materially.

Financial performance: decomposing the FY2024 decline and why margins held up#

Revenue fell to $50.52B in FY2024 from $60.25B in FY2023, a drop of -16.15%, driven primarily by softer end-market demand and inventory normalization following the equipment cycle peak in 2022–2023. Despite that revenue pressure, gross profit of $19.50B produced a gross margin of 38.59%, up from 37.02% in the prior year, and operating income of $11.43B produced an operating margin of 22.62%. Those margin levels are strong for a heavy-equipment OEM and reflect a combination of pricing, favorable product mix and operating leverage.

Net income compressed to $7.10B, a -30.16% decline year-over-year, reflecting both lower revenue and the period’s operating dynamics. When we calculate simple profitability ratios using the company’s FY figures, the net income / total shareholders’ equity reading for FY2024 is approximately 31.10% (7.10 / 22.84), which is materially higher than the TTM ROE figure reported in the dataset (21.98%). This discrepancy arises because TTM and fiscal-year aggregates use different rolling-period denominators and potentially different debt and cash snapshots; for transparency we rely on the FY aggregates for year-on-year comparisons while flagging the divergence where TTM metrics differ.

Table 1 presents a compact view of the revenue, gross profit and net income trends from FY2021–FY2024 and shows how margins evolved as the cycle turned.

The key takeaway is that Deere’s margins expanded relative to 2022 even as revenue fell from the 2023 peak. This suggests pricing power and cost discipline preserved operating profitability through the demand downdraft. That dynamic — falling top line with resilient margins — is a classic machinery-cycle pattern, but it leaves room for operating leverage to reverse should volumes decline further.

Cash flow, capex and the trade-off of shareholder returns#

Deere’s cash-flow profile in FY2024 shows continued strong operating cash generation with some reallocation toward capex and shareholder distributions. The company reported net cash provided by operating activities of $9.23B and free cash flow of $4.43B after capital expenditures of $4.80B. Free-cash-flow conversion relative to net income is roughly 62.45% (4.43 / 7.09), reflecting sizeable capex and working capital timing. Capital spending as a percent of revenue in FY2024 is approximately 9.50% (4.80 / 50.52), which is elevated relative to what one might expect for steady-state industrial manufacturers and signals ongoing investment in capacity, product development and electrification/technology.

Deere continued significant capital returns in FY2024, with dividends paid of $1.60B and share repurchases of $4.01B recorded in the cash-flow statement. That buyback level is notable in an environment of rising net debt and signals management’s preference to return excess cash and support EPS during a cyclical trough.

Table 2 summarizes cash-flow and capital-allocation metrics.

The financing choices are consequential. Net cash used for financing activities in FY2024 was -$2.72B, but total debt increased: total debt rose to $65.46B and net debt to $58.14B at year-end. That combination — meaningful repurchases while net debt moves higher — is a deliberate capital-allocation stance. It reduces shares outstanding and supports per-share earnings in the short term, but it also increases leverage and interest-cost exposure.

Balance sheet and leverage: how stretched is Deere? — reconciling apparent metric conflicts#

On a headline basis Deere finished FY2024 with total assets of $107.32B, total liabilities of $84.39B, and total stockholders’ equity of $22.84B. The reported long-term debt stands at $43.23B and total debt at $65.46B. Using those FY numbers, net debt divided by FY EBITDA (EBITDA = $14.67B) equates to approximately 3.97x (58.14 / 14.67). That is a material leverage level for a manufacturing company but not uncommon for a capital-intensive OEM that also maintains financing activities through its captive-finance business.

It is important to note and to highlight a data inconsistency encountered in the inputs: some TTM metrics in the provided dataset show net debt / EBITDA of 4.91x and a current ratio of 0.74x, whereas a straightforward calculation using FY current assets and current liabilities (77.67 / 36.41) yields a current ratio of ~2.13x. The divergence is explainable: TTM and pro-forma measures can incorporate trailing components, off-balance-sheet adjustments, or different definitions of current assets (for example, excluding receivables financed through securitizations or excluding short-term investments). For transparency we prioritize the explicit FY balance-sheet line items for the year-end position while noting that TTM liquidity ratios reported may incorporate different denominators. Investors should therefore treat TTM liquidity values as distinct from fiscal-year snapshots and refer to the company’s full disclosures for the reconciliations.

From a practical standpoint, Deere’s leverage profile should be considered in light of its business model: the company runs a large financing arm that both supports equipment sales and creates interest-rate and credit exposure. Higher leverage amplifies cyclical earnings volatility and will influence capital allocation choices if the equipment cycle deteriorates further.

Earnings cadence and near-term signals from quarterly surprises#

Deere’s quarterly earnings surprises through 2024–2025 show a pattern of outperformance versus consensus estimates, which speaks to management’s ability to control costs and manage mix even in a softer demand environment. Recent beats include a +3.94% surprise on August 14, 2025 (actual EPS 4.75 vs est. 4.57), a +19.42% surprise on May 15, 2025 (6.64 vs 5.56), and a +16.99% beat on November 21, 2024 (4.55 vs 3.89). Those beats are meaningful in percentage terms and indicate recurring execution versus near-term analyst expectations.

However, beats do not erase the top-line cycle risk. The FY2024 full-year comparisons show revenue contraction and income compression. The persistent beats suggest that consensus has been cautious and that Deere retains the capacity to manage margins through pricing and mix actions, but they also raise the bar for future quarters: sustaining beats will depend on stabilization in end-market demand and the company’s ability to translate orders into revenue without elevated working-capital drag.

Strategic positioning and competitive dynamics: where Deere’s moat shows up#

Deere remains the nominal market leader in premium agricultural and construction equipment, with clear pricing power evidenced by sustained high gross margins even through a cyclical slowdown. The company’s sizable investment in R&D — $2.29B in FY2024 — and continued capex support initiatives in precision agriculture, autonomy, telematics and electrification. These investments align with industry structural trends: customers seeking productivity gains, fuel and emissions regulation, and digital services that increase lifetime revenue per unit.

Those strategic investments are expensive and take time to monetize; R&D as a percent of revenue in FY2024 is roughly 4.53% (2.29 / 50.52). This level of spend supports Deere’s product differentiation and helps maintain a premium pricing position versus lower-cost competitors. The core competitive question is whether the company can convert technology spend into recurring, high-margin services at scale — that would improve revenue cyclicality and smooth cash flows over time.

From a market-power lens, Deere’s ability to keep margins elevated while revenue contracted demonstrates durable customer willingness to pay for differentiated equipment and connected services, at least to date. The company faces the usual OEM pressures — used-equipment competition, commodity input-cost swings and dealer inventory cycles — but its brand, dealer network and financing platform remain meaningful competitive assets.

Forward signals from analyst estimates and what they imply for recovery timing#

Analyst-formatted estimates embedded in the dataset show consensus modeling for a trough in 2025 with a gradual recovery thereafter. For example, consensus estimates include an average projected revenue of $38.83B for the year ending October 27, 2025 and EPS of $18.62, with projections rising to $52.55B revenue and $30.52 EPS by 2028 (formatted averages). Those estimates imply substantial volatility and a multi-year recovery arc.

Put differently, analysts expect a material top-line trough followed by a multi-year rebound that would restore revenue to near-2023 levels by 2028. The credibility of that profile depends on end-market dynamics (agricultural replacement cycles, commodity prices, farm incomes) and Deere’s ability to convert product-cycle improvements into shipments without significant margin erosion. Given Deere’s historical execution on margin control and the company's ongoing investments in technology and capacity, the recovery path is plausible, but sensitive to macro agriculture fundamentals and capital spending by customers.

Risks and stress points to monitor#

Several concrete risks emerge from the numbers and trends. First, leverage is elevated: net debt of $58.14B combined with sizable capex programs and an equipment-cycle trough increases refinancing and interest-rate risk. Second, revenue remained volatile: the FY2024 revenue drop and analyst models implying a deeper 2025 trough mean operating leverage could work against Deere if volumes decline further. Third, inventory and working-capital dynamics within dealer networks can generate cash-flow swings; Deere’s captive-finance exposures amplify credit risk to the degree farm and construction customers face tighter conditions.

Operationally, execution risks include timing of new-product ramp (autonomy, electrified platforms), cost inflation in raw materials and potential margin pressure if pricing cannot fully offset mix or cost headwinds. Finally, capital-allocation risk exists because the company is choosing to return cash aggressively despite rising net debt; if cyclical revenues remain depressed, those buybacks could constrain balance-sheet flexibility.

What this means for investors#

Investors reviewing Deere’s financials should focus on three linked questions: can end-market demand stabilize and recover as analysts expect; will Deere convert R&D and capex into higher-margin recurring revenues; and how will management balance shareholder returns against leverage and financing risk?

First, the company’s strong FY2024 margins show operational resilience and pricing power, which supports earnings even as volumes soften. That resilience is a structural advantage for Deere compared with lower-margin peers. Second, capital allocation is actively returning cash to shareholders, which supports per-share metrics but increases leverage and reduces cushion for downside cyclical risk. Third, the multiple data inconsistencies between FY snapshots and TTM metrics in the supplied dataset — notably in current ratio and net debt/EBITDA — illustrate the need to reconcile rolling metrics with year-end statements before drawing liquidity conclusions.

Investors should therefore monitor four data points in the quarters ahead: revenue trajectory and order-entry trends at dealers, free-cash-flow conversion (operating cash flow minus capex), net-debt movements versus EBITDA, and signs that investments in services/telematics are translating into recurring revenue and higher lifetime value per machine.

Conclusion: a durable margin story inside a cyclical revenue trough#

Deere’s FY2024 results present a mixed but coherent story: top-line contraction of -16.15% and net-income compression of -30.16% coexist with robust gross margin (38.59%) and continued free-cash-flow generation ($4.43B). Management is returning capital aggressively — $4.01B in buybacks and $1.60B in dividends — while net debt rose to $58.14B, elevating leverage. The company’s strategic investments in R&D and capacity underpin a durable competitive position, but they require continued execution and sufficient end-market recovery to deliver high-return outcomes.

In short, Deere today is an industrial leader operating through a classic equipment-cycle trough: margins show resilience, cash generation remains solid, and capital allocation prioritizes shareholder returns even as leverage increases. The near-term investment case hinges on the timing and strength of a demand rebound and the balance between returning cash and preserving balance-sheet flexibility. For stakeholders, the imperative is to watch order flow, dealer inventories, and free-cash-flow conversion as the clearest forward indicators of whether Deere’s margin-rich operating model can sustain itself through the cycle and fund the strategic transitions management is pursuing.

Sources: Fiscal-year consolidated statements and quarterly earnings data as provided in the company financial dataset (FY2024 statements and quarterly earnings surprises). For broader market context on volatility and cyclical drivers referenced in the narrative, see Seeking Alpha background material on market dynamics Seeking Alpha - Wikipedia.