Deere & Company Financial Model
Industrial Equipment Company Financials Example (Free Excel Download)
Deere & Company is a global leader in the manufacturing of agricultural, construction, and forestry equipment, operating under the iconic John Deere brand.
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About this model
This model evaluates the cyclical earnings power and equity valuation of Deere & Company to help an equity research analyst determine if the current share price accurately reflects the bottoming of the large agriculture equipment cycle and the structural margin improvements achieved by management.
Deere & Company is a global leader in the manufacturing of agricultural, construction, and forestry equipment, operating under the iconic John Deere brand. The company also operates a large captive finance arm that provides wholesale financing to dealers and retail financing to end customers.
The business is divided into four main segments: Production & Precision Agriculture (approximately 45% of equipment net sales), Small Agriculture & Turf (approximately 25%), Construction & Forestry (approximately 30%), and Financial Services. Geographically, the United States and Canada account for roughly 60% of total revenues, followed by Europe, Latin America, and the rest of the world.
Deere operates an asset-heavy manufacturing business model paired with a highly levered financial services division. Its competitive position is dominant in North American large agriculture, where it holds a commanding market share in high-horsepower tractors and combines, and it is a strong secondary player in global construction equipment behind Caterpillar. Recent major events include a severe cyclical downturn in large agriculture volumes during fiscal 2024 and 2025, alongside a strategic shift towards a "Smart Industrial" operating model that prioritises precision agriculture technology, automation, and software solutions.
The downloadable Deere & Company financial model includes SEC-sourced historical financials, forecast assumptions, core operating schedules, and valuation outputs in an Excel workbook built for review and scenario analysis.
A turnkey financial model
Live formulas, no hardcoded values
Outputs are driven by live formulas, so the workbook updates from its assumptions instead of relying on hardcoded results.
All assumptions in one tab
Inputs are clearly marked in the Assumptions tab and separated from calculations, making it clear what to change and what to leave intact.
Statements always balancing
For integrated-statement models, the balance sheet, cash flow, and supporting schedules tie through properly.
Distinct schedules for clarity
Debt, working capital, taxes, and cash flow can get messy quickly. We group calculations in clear schedules, not across disconnected tabs.
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Changes flow through the model
Update a key driver and see the impact carry through the forecast, financing, and return outputs. We never use hardcoded numbers in formulas.
Historicals & AssumptionsDeere & Company financial modelCompany, Historicals & Assumptions used
Source: SEC EDGAR · values in USD
| Line item | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| Revenue | $44.02B | $52.58B | $61.25B | $51.72B | $45.68B |
| Research and development expenses ​ | $1.59B | $1.91B | $2.18B | $2.29B | $2.31B |
| Other operating expenses ​ | $1.34B | $1.27B | $1.29B | $1.26B | $1.12B |
| Net income | $5.96B | $7.13B | $10.17B | $7.10B | $5.03B |
Forecast assumptions
Defaults used in the downloadable model. Forecast horizon: FY2026–FY2030.
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How to build a detailed financial model for Deere & Company
A complete walkthrough of every driver, margin, working-capital input, and capital-allocation assumption used in the downloadable model.
Revenue Deep Dive
Production & Precision Agriculture (PPA)
- Segment name: Production and precision agriculture
- Revenue driver formula: Prior Year Net Sales x (1 + Volume/Mix % + Price Realisation % + Currency Translation %)
- Historical growth rate: Highly cyclical; grew over 20% in FY2023, declined 22% in FY2024, and declined further in FY2025.
- Key growth levers and headwinds: Driven by global crop prices (corn, soybeans, wheat), farm net income, fleet age, and adoption rates of precision technology (e.g., See & Spray, autonomous tractors). Headwinds include high interest rates and falling agricultural commodity prices.
- Pricing dynamics: Strong pricing power historically (achieving 8-10% increases during recent inflationary periods), now normalising to 1-2% annual price realisation.
- Revenue recognition notes: Recognised when control transfers to the independent dealer or retail customer.
- Seasonality: Strongest in the fiscal second and third quarters (spring planting and early harvest preparation in the Northern Hemisphere).
Small Agriculture & Turf (SAT)
- Segment name: Small agriculture and turf
- Revenue driver formula: Prior Year Net Sales x (1 + Volume/Mix % + Price Realisation % + Currency Translation %)
- Historical growth rate: Declined 22% in FY2024 following mid-single-digit growth in FY2023.
- Key growth levers and headwinds: Tied to dairy and livestock producer profitability, US housing starts, and consumer spending on landscaping and turf equipment.
- Pricing dynamics: Competitive pricing environment, though Deere commands a premium for brand strength.
- Revenue recognition notes: Standard point-in-time recognition upon shipment to dealers.
- Seasonality: Highly seasonal, peaking in the spring (fiscal second quarter) ahead of the mowing and landscaping season.
Construction & Forestry (CF)
- Segment name: Construction and forestry
- Revenue driver formula: Prior Year Net Sales x (1 + Volume/Mix % + Price Realisation % + Currency Translation %)
- Historical growth rate: Declined 12% in FY2024 after 18% growth in FY2023.
- Key growth levers and headwinds: Driven by US infrastructure spending, non-residential construction, housing starts, and forestry commodity prices.
- Pricing dynamics: Spot pricing heavily influenced by dealer inventory levels and competitor (Caterpillar, Komatsu) actions.
- Revenue recognition notes: Point-in-time upon shipment.
- Seasonality: Relatively balanced, with slight dips in the winter months (fiscal first quarter).
Financial Services
- Segment name: Financial services
- Revenue driver formula: Average Portfolio Balance x Average Financing Yield
- Historical growth rate: Grew 22% in FY2024 to $5.78 billion, driven by higher interest rates and larger portfolio balances.
- Key growth levers and headwinds: Driven by equipment sales volumes (which dictate origination volumes) and the interest rate environment.
- Pricing dynamics: Regulated and contractual; rates are set based on the underlying cost of funds plus a spread, often subsidised by the equipment operations to drive sales.
- Revenue recognition notes: Interest income is recognised over the life of the loan using the effective interest method; lease revenue is recognised on a straight-line basis.
- Seasonality: Originations track the seasonality of equipment sales.
Cost Structure
Variable Costs / COGS
- Line-by-line breakdown: Raw materials (primarily steel and components), direct labour, manufacturing overhead, and freight.
- Gross margin range: Equipment operations gross margin typically ranges from 25% to 33%.
- Key input costs and commodity exposures: Highly exposed to steel prices, energy costs, and global supply chain logistics.
- How COGS scales with revenue: High operating leverage; margins expand rapidly during volume upswings and contract during cyclical troughs, though recent structural improvements have raised the trough margin floor.
Operating Expenses
- R&D: Typically 3.5% to 4.5% of net sales. It covers traditional mechanical engineering as well as significant investments in software, autonomy, and precision agriculture technology.
- SG&A: Typically 8% to 10% of net sales. It is largely headcount-driven but includes dealer support and marketing programmes.
- Depreciation & Amortisation: Approximately 2% to 3% of equipment net sales, excluding the heavy depreciation of equipment on operating leases within the Financial Services segment.
- Stock-Based Compensation: Less than 1% of revenue; not a major distortion compared to technology companies.
- Restructuring / one-time charges: Occasional employee-separation programmes during cyclical downturns (e.g., late FY2024).
Margin Profile
- Gross margin: 25% to 33% for equipment operations.
- EBITDA margin: 18% to 24% consolidated.
- Operating margin: PPA operating margins peak at 22-26% and trough around 12-15%. SAT margins range from 12% to 18%. CF margins range from 10% to 18%.
- Margin trend: Structurally expanding over the last five years due to the Smart Industrial strategy, though currently compressing cyclically due to lower shipment volumes and fixed cost absorption headwinds.
Balance Sheet Structure
- Total assets: Approximately $100 billion, heavily skewed by the Financial Services portfolio.
- Key asset categories: Finance Receivables (retail notes and wholesale dealer floorplan), Equipment on Operating Leases, Inventory, and PP&E.
- Goodwill & intangibles: Less than 5% of total assets, reflecting a history of organic growth rather than transformational M&A.
- Working capital profile:
- Days Sales Outstanding (DSO): 30 to 40 days for equipment operations (excluding finance receivables).
- Days Inventory Outstanding (DIO): 70 to 90 days.
- Days Payable Outstanding (DPO): 40 to 50 days.
- Net working capital as % of revenue: Typically 10% to 15%.
- Is working capital positive or negative?: Positive. The company requires significant working capital to build inventory ahead of the spring selling season.
- PP&E: Consists of heavy manufacturing facilities globally. Maintenance capex is roughly equal to depreciation.
- Right-of-use assets / operating leases: Immaterial relative to the size of the balance sheet.
Capital Expenditure & Investment
- Capex as % of revenue: 3.0% to 4.0% of equipment net sales.
- Maintenance capex vs. growth capex: Approximately 60% maintenance and 40% growth, with growth capex directed towards factory automation and precision ag tooling.
- Major capex programmes underway: Investments in battery-electric technology for small turf equipment and autonomous technology integration.
- Capitalised software / development costs: Material but stable, primarily related to precision agriculture software.
- M&A pattern: Bolt-on acquirer focused on technology (e.g., Bear Flag Robotics, Blue River Technology, Kreisel Electric).
- Typical acquisition multiple paid: Undisclosed, but generally high multiples for small, pre-revenue technology startups.
Debt & Capital Structure
- Total debt: Approximately $60 billion consolidated, but over 90% of this sits in the Financial Services segment.
- Debt/EBITDA ratio: Consolidated Debt/EBITDA is misleading. Equipment Operations maintains near-zero net debt. Financial Services is levered at approximately 7.0x Debt-to-Equity.
- Credit rating: A2 (Moody's) / A (S&P) for Equipment Operations.
- Key debt instruments: Medium-term notes, commercial paper, and securitised retail notes.
- Maturity profile: Well-laddered, with heavy reliance on short-term commercial paper for seasonal working capital needs.
- Interest rate profile: A mix of fixed and floating, actively managed with interest rate swaps to match the duration and rate profile of the finance receivables portfolio.
- Covenants: Standard interest coverage and leverage ratios; Deere operates well within these limits.
- Share repurchase programme: Highly active. The company routinely repurchases $3 billion to $4 billion annually, returning excess cash to shareholders.
- Dividend policy: Target payout ratio of 25% to 35% of mid-cycle earnings.
Cash Flow Characteristics
- Operating cash flow conversion: OCF to Net Income is typically 1.0x to 1.2x, though it fluctuates wildly based on wholesale receivable originations and collections.
- Free cash flow margin: 10% to 15% of equipment net sales during mid-cycle conditions.
- Major non-cash items: Depreciation of PP&E, depreciation of equipment on operating leases, and provision for credit losses.
- Working capital cash flow impact: A major use of cash during cyclical upswings (building inventory and receivables) and a source of cash during downturns (liquidating inventory).
- Capex intensity: Moderate (3-4% of sales).
- Cash tax rate vs. GAAP effective tax rate: Cash taxes closely track the GAAP effective tax rate of approximately 22%.
Sheet Structure
- Assumptions: Hardcoded inputs for macroeconomic drivers, segment volume growth, price realisation, margin targets, tax rates, and WACC.
- Consolidated Income Statement: Total revenues, costs, and net income, built by summing the Equipment Operations and Financial Services sheets and applying intercompany eliminations.
- Equipment Operations Income Statement: Revenue broken out by PPA, SAT, and CF. Includes COGS, gross profit, R&D, SG&A, and operating profit by segment.
- Financial Services Income Statement: Interest income on retail notes, interest income on wholesale receivables, lease revenues, interest expense, provision for credit losses, and SG&A.
- Consolidated Balance Sheet: Assets, liabilities, and equity. Must explicitly separate Equipment Operations assets (inventory, PP&E) from Financial Services assets (finance receivables, equipment on operating leases).
- Consolidated Cash Flow Statement: Net income, non-cash adjustments, changes in working capital, capex, debt issuance/repayment, and share repurchases.
- Working Capital Schedule: Calculations for DSO, DIO, DPO, and the resulting changes in accounts receivable, inventory, and accounts payable.
- Debt & Interest Schedule: Separate debt tranches for Equipment Operations and Financial Services. Calculates interest expense based on average borrowing balances.
- Financial Services Portfolio Schedule: Roll-forward of retail notes, wholesale receivables, and operating leases. Calculates the provision for credit losses based on a net charge-off assumption.
- Valuation (SOTP / DCF): Sum-of-the-parts valuation. Unlevered DCF for Equipment Operations and a Dividend Discount Model (or Price/Book multiple) for Financial Services.
Key Financial Relationships
- `PPA Net Sales = Prior Year PPA Net Sales * (1 + PPA Volume Growth + PPA Price Realisation)`
- `SAT Net Sales = Prior Year SAT Net Sales * (1 + SAT Volume Growth + SAT Price Realisation)`
- `CF Net Sales = Prior Year CF Net Sales * (1 + CF Volume Growth + CF Price Realisation)`
- `Equipment Operations Total Net Sales = PPA Net Sales + SAT Net Sales + CF Net Sales`
- `Segment Operating Profit = Segment Net Sales * Segment Operating Margin`
- `Financial Services Average Portfolio = (Beginning Total Receivables and Leases + Ending Total Receivables and Leases) / 2`
- `Financial Services Revenue = Financial Services Average Portfolio * Average Financing Yield`
- `Financial Services Interest Expense = Financial Services Average Debt * Average Cost of Debt`
- `Provision for Credit Losses = Financial Services Average Portfolio * Net Charge-Off Rate`
- `Consolidated Net Income = Equipment Operations Net Income + Financial Services Net Income - Intercompany Eliminations`
- `Financial Services Debt = Financial Services Equity * Target Leverage Ratio (approx 7.0x)`
- `Free Cash Flow (Equipment Ops) = Equipment Ops Net Income + D&A - Capex - Change in Net Working Capital`
Cross-Sheet Dependencies
The Assumptions sheet drives the Equipment Operations Income Statement and the Financial Services Portfolio Schedule. The revenue generated in Equipment Operations dictates the origination volume in the Financial Services Portfolio Schedule. The portfolio size dictates the borrowing requirements on the Debt & Interest Schedule. The interest expense from the debt schedule feeds back into the Financial Services Income Statement. The net income from both divisions flows into the Consolidated Income Statement and the Consolidated Cash Flow Statement. The cash flow statement determines the ending cash balance, which flows to the Consolidated Balance Sheet to ensure it balances. A circularity exists between Financial Services debt, interest expense, and net income; this requires an iterative calculation or a macro to resolve.
Sign Convention
- Revenues, assets, and equity are positive.
- Expenses, capital expenditures, and liabilities are positive.
- On the Cash Flow Statement, cash inflows are positive and cash outflows are negative.
- Margins and growth rates are expressed as positive or negative percentages.
Things Most Likely to Go Wrong
- Treating Deere as a standard corporate entity. Applying a consolidated EV/EBITDA multiple is fundamentally incorrect because it includes the massive debt of the Financial Services segment.
- Failing to eliminate intercompany transactions. Financial Services pays compensation to Equipment Operations, and Equipment Operations subsidises interest rates for Financial Services. These must be eliminated in consolidation.
- Misunderstanding the provision for credit losses. It is a non-cash expense that directly impacts Financial Services net income and must be added back on the cash flow statement.
- Overestimating trough margins. While management claims structural improvements, the PPA segment still possesses immense operating leverage; a 20% drop in volume will severely compress margins.
- Ignoring the difference between retail notes and wholesale receivables. Wholesale receivables fluctuate wildly based on dealer inventory levels, heavily distorting operating cash flow.
- Miscalculating the Financial Services debt requirement. The captive finance arm must maintain a strict 7-to-1 debt-to-equity ratio to preserve its credit rating.
- Forgetting to include the depreciation of equipment on operating leases, which is a massive line item distinct from standard PP&E depreciation.
- Applying a single growth rate to the whole business. PPA and SAT have completely different cyclical drivers and must be modelled separately.
Validation Checks
- Consolidated Balance Sheet must balance: Total Assets = Total Liabilities + Shareholders' Equity.
- Financial Services Debt-to-Equity ratio should remain between 6.8x and 7.2x.
- Equipment Operations Gross Margin should remain within the historical 25% to 33% band.
- PPA Operating Margin should not exceed 26% (historical peak) or fall below 10% (historical trough).
- Effective tax rate should remain between 21% and 23%.
- Consolidated OCF should be greater than Consolidated Net Income over a multi-year period.
- Intercompany eliminations for net income must net to zero at the consolidated level.
Key Assumptions (Default Values)
| Assumption | Default Value | Unit | Rationale |
|---|---|---|---|
| PPA Volume Growth | -15.0 | % | Reflects the ongoing cyclical trough in large agriculture expected in FY2025/FY2026. |
| PPA Price Realisation | 1.0 | % | Normalised pricing power as inflation cools. |
| SAT Volume Growth | -10.0 | % | Weakness in consumer turf and small agriculture markets. |
| SAT Price Realisation | 1.0 | % | Normalised pricing power. |
| CF Volume Growth | -5.0 | % | Moderating construction demand offset by infrastructure spending. |
| CF Price Realisation | 1.5 | % | Stable pricing in construction equipment. |
| PPA Operating Margin | 14.0 | % | Trough margin assumption based on management guidance for FY2025/2026. |
| SAT Operating Margin | 13.5 | % | Trough margin assumption. |
| CF Operating Margin | 14.5 | % | Mid-cycle margin assumption. |
| Financial Services Yield | 6.5 | % | Based on recent average portfolio financing rates. |
| Financial Services Cost of Debt | 4.5 | % | Based on recent medium-term note issuances and commercial paper rates. |
| Net Charge-Off Rate | 0.50 | % | Historical average for the finance portfolio. |
| Effective Tax Rate | 22.0 | % | Management guidance and historical average. |
| Capex as % of Eq. Sales | 3.5 | % | Historical average required to fund the Smart Industrial strategy. |
| Target FS Leverage (D/E) | 7.0 | x | Stated management target for the captive finance subsidiary. |
| Share Repurchases | 3,000 | $ Millions | Run-rate based on recent capital allocation practices. |
| WACC (Equipment Ops) | 8.5 | % | Standard cost of capital for a cyclical industrial manufacturer. |
| Terminal Growth Rate | 2.0 | % | Long-term global GDP and population growth proxy. |
Data Sources & Benchmarks
- Filings: SEC EDGAR (Form 10-K, 10-Q), Deere Investor Relations website for earnings presentations and supplemental consolidating data.
- Peers: Caterpillar (CAT) for construction benchmarking; CNH Industrial (CNHI) and AGCO (AGCO) for agriculture benchmarking.
- Industry Data: USDA farm income forecasts, AEM (Association of Equipment Manufacturers) monthly tractor and combine retail sales reports.
- Consensus Estimates: Bloomberg or FactSet for forward-looking volume and margin consensus.
Sources
- Deere & Company Form 10-K for the Fiscal Year Ended October 27, 2024.
- Deere & Company Q4 2024 Earnings Release and Supplemental Consolidating Data (November 21, 2024).
- Deere & Company Q4 2025 Earnings Release (November 26, 2025).
- SEC EDGAR Database (https://www.sec.gov/edgar).
- Deere Investor Relations (https://investor.deere.com).
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Frequently asked
What does Deere & Company do?+
Deere & Company, operating under the iconic John Deere brand, is a global leader in manufacturing agricultural, construction, and forestry equipment. The company also includes a large captive finance arm that provides wholesale financing to dealers and retail financing to end customers.
What are the primary revenue drivers for Deere & Company?+
Deere & Company's revenues are primarily driven by its Production & Precision Agriculture, Small Agriculture & Turf, and Construction & Forestry segments. Geographically, the United States and Canada account for approximately 60% of its total revenues.
What is Deere & Company's typical capital expenditure as a percentage of revenue?+
Deere & Company's capital expenditure typically ranges from 3.0% to 4.0% of equipment net sales. Approximately 60% of this capex is for maintenance, with the remaining 40% directed towards growth initiatives like factory automation and precision ag tooling.
What is the main purpose of the Deere & Company financial model?+
The financial model evaluates Deere & Company's cyclical earnings power and equity valuation. It aims to help equity research analysts determine if the current share price accurately reflects the bottoming of the large agriculture equipment cycle and the structural margin improvements achieved by management.
Is an Excel financial model available for download for Deere & Company?+
Yes, an Excel financial model for Deere & Company is available for download. This model provides a forecast horizon covering fiscal years 2026 through 2030.
How does Deere & Company's balance sheet structure reflect its business operations?+
Deere & Company's balance sheet, with total assets around $100 billion, is heavily influenced by its Financial Services portfolio, including significant finance receivables. The equipment manufacturing operations require substantial positive net working capital to build inventory ahead of the spring selling season.
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