John Deere says despite recent gains, its 2024 outlook for its construction and forestry division remains mixed with uncertainty due in part to impending mega projects and infrastructure spending.
The manufacturer reported a strong fourth quarter, with construction and forestry sales increasing 11% to $3.74 billion due to price realization and higher shipment volumes.
Within the division, operating profit improved to $516 million, resulting in a 13.8% operation margin, primarily due to price realization, partially offset by higher production costs and a less favorable sales mix.
The unfavorable effects of foreign currency exchange and a loss on the sale of the Russian roadbuilding business also impacted the results for the fourth quarter.
John Deere
Net income was up 5% for Deere & Company in the fourth quarter of 2023.
The construction and ag equipment manufacturer reported a net income of $2.369 billion for Q4, which ended October 29, 2023, compared with a net income of $2.246 billion for Q4 2022.
For fiscal year 2023, net income attributable to Deere & Company was $10.166 billion, compared with $7.131 billion in 2022.
Worldwide net sales and revenues decreased by 1% to $15.412 billion for the fourth quarter of fiscal 2023 and rose 16%, to $61.251 billion, for the full year. Net sales were $13.801 billion for the quarter and $55.565 billion for the year, compared with $14.351 billion and $47.917 billion in 2022.
John Deere
Looking ahead
Despite 2023's success, John Deere is forecasting a downturn in sales, particularly within the construction and forestry market.
Global construction forestry markets are forecast to be down around 10% as all global markets continue to be challenged.
Within that segment, John Deere predicts roadbuilding markets to be relatively flat, reflecting the continued infrastructure spending in the U.S., compared to the softening in Europe. Road building has been the most consistent as U.S. funding of infrastructure projects continues, and with expectations that it will continue, officials say 2024 should be another solid 2023.
Industry sales for earthmoving equipment in the U.S. and Canada are expected to be down 5% to 10%, while compact construction equipment is forecast to be flat or down 5%.
“While end-market segments vary, oil and gas continue to be stable, and while housing starts and non-res investments require caution due to the current interest-rate environment, U.S. infrastructure and mega project spending supports continued equipment investment,” said Josh Rohleder, John Deere manager of investor communications.
He said the segment's operating margin is projected to be between 17% and 18%, reflecting the continued structural shift in profitability for construction and forestry equipment.
Net income attributable to Deere & Company for fiscal 2024 is forecast to be in the range of $7.75 billion to $8.25 billion.
Norwood noted that while John Deere did recover from the historic low inventories of 2022, it still trails the overall industry. As a result, he said there will be a few pockets of further inventory built in 2024.
"Market dynamics aside, we are a structurally better business today than we were just a few years ago, which is evidenced by our nearly doubled margins in the last four years," Norwood said. "From the acquisition of Wirtgen, which gave us exposure to an excellent road building end-market, to our decision to develop a Deere-designed excavator, we've concentrated our focus on the margin-accretive areas of that business."
“While our end markets will fluctuate, we remain focused on disciplined execution and strategically investing in solutions that drive customer value,” May said. “As evidenced by our guidance for 2024, we are demonstrating higher levels of through-cycle structural profitability while making our company more resilient and better equipped for the future.”
John Deere
