DE (DE)

“And Josh noted, that is just the way the order book was built this year for a much heavier fourth quarter with respect to our large tractors. That are going to be settled here in The U.S. And so that is going to help on the overhead absorption as we move a little bit later in the year.”

“So just to add on to that, know, and I think Josh has covered this already, but our pricing is much more favorable in the back half as well.”

“I would call out, you know, that you know, that all of our regions are expected to be price positive in the large ag business.”

“construction and forestry, fairly balanced between the 2. Both top line and margin in the back half, maybe a little stronger in the fourth quarter than Q3, but overall, pretty close.”

“So price cost will improve as we move through the balance of the of the fiscal year.”

“the cumulative impact of these changes is that on a full year basis, our direct tariff exposure remains essentially unchanged at approximately $1 billion to $1.2 billion, which is approximately a 3% margin headwind.”

“As I mentioned earlier, we expect our business to continue growing this year while delivering strong returns.”

“In addition, we would expect to see our most favorable cost comparisons in the fourth quarter as well.”

“1 thing I would add is that you consider the financial outlook, for the year for the rest of the year, I should say, we would expect slightly higher revenue in the back half with the fourth quarter being higher than the third quarter.”

“Both PPA and SAT modestly adjusted full year price realization expectations by approximately 0.5 points. Primarily reflecting slightly lower expectations for overseas markets.”

“In Europe, 2026 production is largely aligned with retail demand, while in Brazil, we expect to underprize retail demand, most notably in combines.”

“With these improvements, our plan for the year is to continue to manage production in line with retail demand.”

“Overall, we do not expect these developments to meaningfully adjust demand levels this fiscal year, And as a result, ag industry guides outside of South America remain largely unchanged.”

“For fiscal year 26, our implied net price realization for the equipment operations is between 1.5% and 2% for the year.”

“So net of the refunds, our forecast now includes approximately $900 million of tariff costs for the year.”

“And lastly, cash flow from the equipment operations remains projected between $4.5 billion and $5.5 billion”

“Next, our guidance now incorporates an effective tax rate between 24% and 26%.”

“For fiscal year 26, our net income forecast remains unchanged between $4.5 billion and $5 billion”

“For fiscal year 2026, we raised our full year outlook to $860 million primarily driven by favorable fair value adjustment and improved provision for credit losses.”

“The segment's operating margin has also been increased and is now projected to be between 10% and 12% for the full year.”

“The 2026 net sales are now forecasted to be up approximately 20% for the full year.”

“The segment's operating margin guide remains between 13.5% and 15%.”

“We continue to expect net sales to be up approximately 15% for the full year.”

“Our full year forecast for the segment's operating margin is also unchanged. And remains between 11% and 13%.”

“For Production and Precision Ag, net sales forecast is unchanged. And remains down between 5% and 10% for the full year.”

“As a base setup, our expectation is that we will see some level of replacement come back in next year.”

“Take rates that we are seeing thus far in Sea and Spray for 27, would exceed what we saw for this year as well.”

“So we've got good confidence that we'll see that pick up and we'll revert to a more normal mix going forward, and that will aid margins. I mean you can expect us in large ag to do double-digit margins each quarter for the rest of the year.”

“So overall, we still feel very confident in the price realization for the year.”

“I mean, as we'll see a pickup, particularly in North America production here in the second quarter.”

“We'll underproduce retail for Brazilian combines in our second and third quarters to bring those inventory levels down.”

“Yes. I think PPA, if you look at that one specifically, Evan and think about that, you're probably -- the toughest comp is 2Q and then get easier when you get to the back half of the year from a top line perspective.”

“But you'd expect to see kind of mid-single-digit growth for most quarters for the balance of the year.”

“Yes. I mean as we look through the balance of the year for equipment operations as a total, our expectation is to see a bit of growth as we move through the entire of the year.”

“Yes, I mean, I think overall, in large ag in North America... our expectation is we've got some opportunity to gain some share as we move through the course of the year.”

“For combines, as you know, we base our production for the year on that early order program. So that largely defines what we're going to build this year... It will be pretty level through the rest of the year on combines.”

“But we've seen continued progression quarter-over-quarter really for the last better part of the year or so, and we'd expect that to continue going forward.”

“We won't react too quickly. Similar to when we saw tariffs going up last year, we didn't take immediate price action, and you can expect a similar approach for us this year in 2026 as well.”

“We've seen a little bit of change, maybe a little bit more inflationary pressure on materials, but offset by some improvements on the overhead side as we've added volume, we're seeing more overhead efficiency. And so we'll be slightly unfavorable from a production cost standpoint ex tariffs.”

“But we've -- tariffs have been roughly flattish quarter-over-quarter... that $1.2 billion for the full year guide on tariffs is still unchanged.”

“We're probably closer now to price/cost neutral for the full year, just given particularly a little bit of a reduction on the pricing side in C&F.”

“Yes, it's Jepsen, the only thing I'd add to that, David, to your question is, yes, we are seeing increased build rates in tractors, and that's kind of back half related to this order activity that we saw come through.”

“That's probably closer to down 15 or so on tractors, the lower end of that range. And then combines, as we mentioned in our commentary, as we close out that EOP, that will finish better than the range, more like probably down 10% to 15% for combines in that segment.”

“On the sales guide, up 15%... So for all those reasons, we're much closer to 15% now versus those markets we're seeing are up 5%.”

“So our expectation is to still maintain that 1.5 points for large ag price.”

“As we mentioned, our expectation is for Brazilian price realization to be positive for the full year.”

“Yes, starting with large ag, the first quarter, as we mentioned, we did put some incremental incentives in place... We don't expect that to continue through the year.”

“With the stabilization that we're seeing in U.S. ag fundamentals, along with an improving used market, our expectation is that we'll start to see some replacement demand return.”

“Tariffs for the year are still projected at around $1.2 billion as mitigation on Section 232 steel tariffs and some relief in India have been offset by volume growth.”

“And lastly, projections for cash flow from the equipment operations increased by $500 million at both ends of our range and is now expected to be between $4.5 billion and $5.5 billion.”

“Next, our guidance continues to incorporate an effective tax rate between 25% and 27%.”

“For fiscal year '26, our updated outlook for net income is now between $4.5 billion and $5 billion.”

“The segment's operating margin guide is now between 13.5% and 15%.”

“We now expect net sales to be up about 15%.”

“For the segment's operating margin, our full year forecast remains between 11% and 13%.”

“For Production & Precision Ag, net sales are still forecasted to be down between 5% and 10% for the full year.”

“The developments over the course of the past 3 months have strengthened our belief that 2026 marks the bottom of the current cycle as we project mid-single-digit net sales growth for the equipment operations this fiscal year.”

“So as we see demand come back, I think we will see strong incrementals, particularly ex tariffs, but we're still kind of coming off of very low levels right now.”

“So I think we're glad to see some of that order activity move, but it's not -- to Josh's earlier point, it's not a bounce. It's not inflecting hard. It's just we're seeing some positive progress and momentum. So that, I think, does demonstrate we should see momentum as we go forward.”

“in North American large ag, we will enter the year lean from a production perspective but with flexibility to allow us to respond swiftly as market demand inflects.”

“As a result, we'll have a lower than normal level of seasonal production to start the year and won't see the typical early year inventory build.”

“As Deanna talked earlier, seasonality will be a little different for large ag next year given our leaner start in Q1. We will see that typical ramp-up in the second quarter.”

“our expectation is to see growth in acres covered in 2026, and we look forward to seeing our customers have those great savings that we saw in 2025 continue.”

“our expectations, we continue to grow that number in 2026.”

“On small ag, Steve, and specific to turf, our forecast is based off of housing starts coming up a little bit next year, not a massive increase, a low single-digit increase in home sales, should say, not housing starts, home sales.”

“We expect to see growth in Small Ag and Turf as well as in Construction and Forestry.”

“As we look ahead to the next year, we believe our field inventories across all segments are in good shape.”

“We mentioned in last quarter's call that based on the results of the early order program, Deere Sprayer shipments would be down around 20% this coming year.”

“For production precision ag, expect sales down 5% to 10%, which is comprised of the market outlooks noted.”

“We expect to produce North American earthmoving equipment in line with retail in 2026.”

“Our outlook suggests that industry demand is expected to improve in the coming year, with our sales forecasted to outpace this industry growth.”

“But you see margin improved quite a bit as you get into the second quarter and we'll stay at those higher margin levels through the balance of the year.”

“To your question, we would expect to be down year over year in all those quarters, just given the level of decline that we're seeing.”

“We do have some headwinds in our North American labor from our current contract.”

“Yes, if you back off the incremental $600 million of tariffs in production costs, we would still expect to be slightly unfavorable for production costs in 2026.”

“It'll still be positive in 2026, but more muted. Think about closer to that guide range.”

“Early order programs in large tractor pricing North America for 2026 those price increases are in the range of 3% to 4% and that's held.”

“Tariffs for that business have approximately zero point or so margin impact for the full year of 2026.”

“We would like to highlight that our implied midpoint guidance of approximately $16 in earnings per share reflects sub-draft conditions in PPA, with projected fiscal year 2026 sales at less than 80% of mid-cycle levels.”

“Segment operating margin for the full year is forecasted between 11-13%, reflecting stability in international markets amidst incremental tariff and mix headwinds with Large Ag in the U.S. declining another year.”

“We anticipate Production and Precision Ag net sales to be down 5-10% in fiscal year 2026.”

“Notably, we see opportunities for growth ahead in our small ag and turf and construction forestry businesses.”

“I'm going to expect to take some continued price in the future as well to cover that additional piece.”

“The announced list price increases for the active phases of all EOP products are between 2% and 4%.”

“We've introduced large tractor pricing for '26 as well. That's about 3% year-over-year.”

“And we think we're positioned well on the year-end buying side, both on the used side.”

“As we close out the year, what we're going to see is buying that's driven off of those policies.”

“So our expectation for the fourth quarter is about $300 million.”

“We're actually increasing shipments in Brazil, South America in the fourth quarter as we've seen some green shoots down there.”

“Based on our guide, our expectation is sequentially, we would see an increase, kind of high single-digit increase in large ag sales into the fourth quarter.”

“We expect to see some price moderation in the fourth quarter as we've accrued at this current level of incentives in Q3.”

“Brazil, coming off of last year where we ran some negative price, this year, we're mid-single digits positive.”

“In addition, pricing for model year '26 equipment in Brazil will start to be shipped in our fourth quarter as well. So that will provide a lift year-over-year.”

“We'll start to ship model year '26 sprayers in the fourth quarter of the year, which average pricing on sprayers for next year, 4% to 4.5%.”

“So really good progress. We'll do a little bit more in Q4 there, but we've made really good progress and again, about 10% under production.”

“Based on the results of the EOP and expected order intake post EOP, which is based on historical activity, we project model year '26 sprayers to be down roughly 20% year-over-year.”

“It's important to note that the accrual for these programs drove pricing negative in the quarter, but that we've maintained our 2025 full year guide of approximately 1 point of positive price.”

“Based on tariff rates in effect as of today, our forecast for the pretax impact of tariffs in fiscal 2025 is now adjusted to nearly $600 million.”

“And lastly, cash flow expectations from the equipment operations remain in the range of $4.5 billion to $5.5 billion.”

“Next, our guidance reflects an effective tax rate between 19% and 21%.”

“For fiscal year '25, we tightened our outlook for net income from last quarter to now be between $4.75 billion and $5.25 billion.”

“For fiscal year '25, our outlook increased to $770 million.”

“The segment's operating margin is now projected to be between 8.5% and 10%, reflecting higher levels of tariff costs and lower price realization.”

“2025 net sales estimates remain down between 10% and 15%.”

“The segment's operating margin is now forecasted to be between 12% and 13.5%, in line with the improved sales outlook.”

“With projected improvements in Europe, India and North American turf and compact utility tractors, we now expect net sales to be down about 10% this year.”

“For the segment's operating margin, our full year forecast remains between 15.5% and 17%.”

“For Production and Precision Ag, our net sales forecast for the full year remains down between 15% and 20%.”

“There's still a fair bit of uncertainty as we look ahead to next year. However, given reduced field inventory levels, our expectations to build to retail demand across all our businesses will be beneficial, particularly in areas where we're seeing positive momentum as we finish 2025.”

“On top of that, the underproduction we've done this year in small ag and construction forestry should be a year-over-year tailwind to our production as we move into '26 as we're enabling both businesses to build in line with retail demand next year.”

“I think bonus depreciation, this is an area where we could see that benefit us as we get through the end of our fourth quarter and the calendar year.”

“Additionally, the continued strength in customer backlog, ongoing infrastructure spending and a potential boost from recently enacted bonus depreciation give us optimism for earthmoving retail demand as we exit 2025.”

“So we feel really good about our new inventories are positioned and that positions us well to be in line with retail in '26 as well.”

“We expect production costs, ex tariffs, they continue to be positive. They will be positive for the full year, but to a lesser extent in the back half.”

“This year, we're doing about a point of price in a challenged market.”

“And then in Europe as well, we mentioned some green shoots there. Our plan now with mid tractors in Europe is the build in line with retail, given some of the pickup there.”

“In fact, the back half of this year in Brazil will actually build a little bit of seasonal inventory as we go into the spring selling season in the region.”

“Yes, you're right. I mean, the structure of the early order programs will be similar to the past. They will occur in phases over the next several months.”

“2025 marks our first year of renewals for the 2024 Precision Essentials cohort, where we have a year one goal of 70% renewal. Nearly 2/3 of eligible machines have renewed thus far, and we expect that to increase as we continue to engage with our customers in the renewal process.”

“And in Brazil, our order books are full through the third quarter.”

“We don't see much opportunity for price mitigation to impact fiscal 2025, given our order books for most product lines are nearly full for the remainder of the year.”

“For context in the split by business unit, we would expect 40% of the cost to impact our construction forestry operations with about 35% hitting small Ag and turf and about 25% hitting production and precision lag.”

“we expect a pre-tax tariff impact in fiscal year 2025 of just over $500 million should these tariff levels continue throughout the remainder of the fiscal year.”

“The segment's operating margin is now projected to be between 8.5% and 11.5% due primarily to tariff impacts and, to a lesser degree, lower price realization.”

“2025 net sales remain forecasted to be down between 10% and 15%.”

“The segment's operating margin guide is now between 11.5% and 13.5%, primarily due to tariff impacts and the reduction in projected U.S. turf and compact utility tractor shipment volumes.”

“We now expect net sales to be down between 10% and 15%.”

“Our full year forecast for the segment's operating margin is now between 15.5% and 17%, primarily due to tariff impacts.”

“For production and precision Ag, our net sales forecast for the full year remains down between 15% and 20%.”

“And lastly, cash flow from the equipment operations remains projected between $4.5 billion and $5.5 billion.”

“Next, our guidance incorporates an effective tax rate between 20% and 22%.”

“For fiscal year 2025, our outlook for net income has widened to between $4.75 billion and $5.5 billion.”

“For fiscal year '25, our outlook remains at $750 million as benefits from a favorable compare to special items related to the sale of Banco John Deere and lower SA&G expenses are partially offset by less favorable financing spreads.”

“If we look at in production precision Ag, some of the early order programs that are out there with prices, we're in the low single-digit range, 2% to 4% price.”

“It's important to note, however, that this exposure will reduce over the next few years as we begin to roll out Deer design and U.S. manufactured excavators.”

“I would say, you know, when we saw some of this occur in the past, when we saw some payments come through in, call it, you know, late 2019, generally, what we saw is a lot of those things went to shore up balance sheets, pay down debt, you know, buy inputs, and those sorts of things. So I think our expectation is it doesn't probably drive new equipment demands in 2025.”

“You know, large ag, as we mentioned, you know, it's going to be a lot more like normal seasonality in terms of sales in that segment. We'll see, you know, we'll see, we would expect to see sales peak in the second quarter in large ag as we typically do. So that will likely be the strongest margin quarter for the year.”

“We probably have a little more underproduction on the earthmoving side in 2Q there as well. So that'll impact their cadence of margins as we go through the year. They'll actually, we'd expect them to actually build from a margin perspective and improve as we go through the remainder of the year.”

“We're going to expect to just given dynamics in the market that we'll probably see some continued price pressure, particularly in the early part of the year.”

“It is important to note, however, that our exposure to the recently enacted China tariffs is expected to have an immaterial amount on our business.”

“It's important to note, however, that intra-year, we will see an atypical quarterly cadence as price actions taken in the first half of the year will moderate in the third and fourth quarters as we ramp production in the back half of the year.”

“While progress has been made, normalizing used inventory levels in North America, particularly in high horsepower tractors, remains a top priority for the fiscal year.”

“As a result, we are targeting to finish the year with new inventory in the US roughly unchanged year over year, reflecting our plan to produce in line with retail demand in the region.”

“We expect to see continued tech adoption in Brazil as connectivity expands within the region, and customers are able to maximize the value of John Deere's precision ag solutions and the John Deere Operations Center.”

“But ultimately, we don't expect this to translate into immediate order velocity as general uncertainty continues to persist and customers remain cautious across all markets.”

“For the full year, the reduction in both our net sales and operating profit guides for large ag are primarily driven by currency changes as we extend the impact of the stronger US dollar to the rest of our projections, including our unhedged currency exposure in the latter quarters of the year.”

“As a result, we expect to see these sales occur across the remainder of the year for all three divisions.”

“Lastly, cash flow from the equipment operations remains projected between $4.5 billion and $5.5 billion.”

“For fiscal year 2025, our outlook for net income remains between $5 billion and $5.5 billion.”

“For fiscal year 2025, our outlook remains at $750 million as benefits from a lower provision for credit losses are partially offset by less favorable financing spreads.”

“The segment's operating margin continues to be projected between 11.5% and 12.5%.”

“For 2025, net sales remain forecasted down between 10% and 15%.”

“The segment's operating margin guide remains between 13% and 14%.”

“We expect net sales to remain down around 10%.”

“For production precision ag, net sales are now forecasted to be down between 15% and 20% for the full year.”

“As a result, we expect to recover the first quarter shortfall over the remainder of the year.”

“Our proactive decisions in 2024 have positioned us well to achieve structurally better margins in what we anticipate will be a sub-80% of mid-cycle year for equipment operations.”

“This will have a material impact on our quarterly decremental margins as well as overall profitability for the segment in the quarter.”

“Given the additional softening in retail demand that we're anticipating in 2025, we've made the decision to continue to underproduce retail in the first half of next year to ensure inventory levels are appropriately sized to respond to demand changes in the back half of 2025.”

“I think we feel good about the stabilized level that we saw in the fourth quarter... We'll be working over that again over the course of the next couple of quarters.”

“Actually, margins, if you think about decrementals for construction and forestry in the first quarter, it'll be higher than the implied guide for the full year, again, given the underproduction.”

“And then, to your question, as you move throughout the course of the year, those year-over-year comps get better, particularly in the back half. And you get to kind of flattish, if not up a little bit, as you look at Q3, Q4 of 2025.”

“And then those comps will get progressively better as we move through the year, and you're comparing to the back half of 2024.”

“If you look at our segments, and I'll look at large ag and construction... as you look at how that's going to play out in year-over-year comps for 2025, we would expect greater year-over-year declines in the first half of the year for both segments.”

“We are expecting a little bit higher incentive rate in 2025, and that higher incentive rate is really driven by a focus on continuing to put funds to work in the pool fund area.”

“That's actually contemplated in our pricing guide for 2025 as well. We're talking about net price of 1% for the segment.”

“As we mentioned, we expect pricing to be positive across all three segments.”

“Said more simply, we expect to deliver higher margins at trough than we did during the previous peak in 2013.”

“As a result, we expect to see a significant increase in the number of acres covered by See and Spray technology in the 2025 season.”

“our underproduction should put us in the best position to generate strong returns in the back half of the year.”

“Given the steady outlook for road building, combined with demand in global forestry being flat to down 5%, we expect these product lines to provide stability to our overall construction and forestry segment.”

“Overall, we expect to see positive price costs for the full fiscal year, yet another example of the structural improvements our teams continue to deliver.”

“Now when we think about the first quarter of 2025, we expect top-line sales for the equipment operations to be down 15% to 20% sequentially from 4Q24, with margins 300 to 400 basis points lower than the full-year guide.”

“We finished 2024 with inventory-to-sales ratios for both mid-size tractors and combines at or slightly above the upper end of our targeted bands, which we feel necessitates further underproduction in those product lines in 2025.”

“Given our flat guide for industry retails in 2025 and the significant underproduction to retail in 2024, producing in line with retail in 2025 will represent a double-digit increase in Deere shipments year-over-year in the region.”

“Conversely, demand for four-wheel-drive tractors in 2025 is expected to decline year-over-year more than the industry guide, but as a reminder, that product line actually saw increased demand in 2024.”

“Demand for row crop tractors in 2025 is expected to be down less than the overall industry forecast, with Deere shipments decreasing even less as production levels rebound to align with retail demand following our high single-digit underproduction for row crop tractors in 2024.”

“Finally, combines will complete the second of three early order program phases next week, and when this program closes at the end of January, we expect the product line to be down in a range similar to the reduction we've seen in sprayers.”

“Results are expected to be higher year-over-year, primarily due to a lower provision for credit losses partially offset by less favorable financing spreads.”

“Continuing with our C&F segment outlook on slide twelve, 2025 net sales are forecasted to be down around 10% to 15%.”

“The forecast assumes roughly one point of positive price realization and half a point of negative currency translation.”

“Additionally, construction and forestry market demand is expected to be down as healthy end markets are offset by continued uncertainty in equipment purchases.”

“However, we significantly underproduce the market and despite the industry demand declining more than anticipated, we still seen inventory decline so far this year and fully anticipate that this trend will accelerate throughout the remainder.”

“For fiscal year '24, we remain -- we maintain our outlook for net income at approximately $7 billion.”

“I think decremental is a bit higher in 4Q compared to what we've done through the year, the underproduction, the biggest driver far and away.”

“So it's a significant underproduction quarter on top of that, for tractor retail tends to be a very strong retail quarter as well. So that's going to be a big quarter for drawdown on the row crop side.”

“we expect to be at that level or better. So maybe a little bit higher than we were talking 10% last quarter, but still in that range of at or lower than the 15% [IS ratio] that we exited 220-plus last year.”

“We did lower our full year guide down to 0.5 point for 2024, given some of the increased pressure. And then that would imply for Q4, flattish pricing for the segment.”

“And so what that will amount to is about mid-single-digit underproduction in construction equipment for this year.”

“The net impact for 2024 is expected to be an expense of about $25 million.”

“We expect this and other additional tactics to help them sell through late model, high horsepower tractors and combines to best position us for next year.”

“For example, our 6 Series tractors in Monheim, Germany are also planning a similar shutdown for roughly 1/3 of their fourth quarter production days, which will have an impact on small Ag margins as well.”

“For example, our guide contemplates planned shutdowns of our 8 Series tractor production line in Waterloo, Iowa for about 50% of the total production days in the quarter, which will have a material impact on our decremental margins.”

“In fact, to put this into perspective, on an absolute basis, we are forecasting to end the year with less than 1 row crop tractor per dealer.”

“And while we expect our inventory to sales ratios, which remain below industry levels to end the year at roughly the same level as last year, this reflects a material decrease in the absolute number of industry.”

“We expect further reductions to occur during the fourth quarter, which is in line with historical trends.”

“combines just opened last week with list price increases across all EOPs currently in the 2% to 3% range.”

“We will also continue to focus on reducing used inventory levels, particularly in North American large Ag for the remainder of the year.”

“And lastly, cash flow from the equipment operations is now projected to be in the range of $6 billion to $6.5 billion.”

“Next, our guidance continues to incorporate an effective tax rate between 23% and 25%.”

“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.”

“The segment's operating margin is now projected to be around 15%, reflecting a tougher competitive environment, decelerating demand and under production of construction equipment.”

“2024 net sales estimates are now expected to be down between 10% and 15% as moderating demand is coupled with planned underproduction.”

“The segment's operating margin continues to be forecasted between 13.5% and 14.5% in line with slowing net sales.”

“For the segment's operating margin, our full year forecast remains between 20.5% and 21.5% despite muted demand.”

“Production and Precision Ag, our net sales forecast remains down between 20 and 25% for the full year.”

“While we don't have a 1Q '25 guide, I would say because of that on our production, probably the typical seasonal patterns in sales should not follow what maybe they would have historically.”

“Nevertheless, we remain committed to underproducing retail demand in the region this year as we target year-end inventory levels, supportive of building in line with retail in 2025.”

“We know that it pays to adopt these technologies, and we expect those used units to move into the market.”

“And then Europe, very, very similar to North America. We're seeing pricing in kind of that normalized range of 2% to 3%. And we expect that really to continue through the course of the year.”

“South America, we've talked Brazil specifically with the inventory that we built in 2023. We will have some negative price there this year kind of in the mid-single digits.”

“North America, we would say normal price realization is in the range of 2% to 3%. We're actually in that range. In fact, on the top end of that, if not a little bit better there. So we've seen strong pricing and expect that to continue through the course of the year.”

“We're definitely taking cost steps. Our focus on taking material and freight out of the business continues, and we expect that to build in the back half.”

“So the way we're exiting '24, I would say, is not indicative of what we would expect '25 to look like as we step into that year regardless of where we see the end marks moving.”

“Kristen, it's Jepsen. I would say definitely, we see the bigger impact in 4Q as seasonally -- you see a higher level of retail, but then also we get seasonal shutdowns and those sorts of things.”

“Last year, row-crop tractors were about 15% inventory to sales as we close out 2023. This year, it's probably going to be closer to 10% and on a unit basis, significant under production.”

“I think notably, we're going to see a significant reduction in that ending inventory level in the back half of the year.”

“I think the back half is actually pretty similar to that, so not materially different.”

“I think full year, I think we expect PPA to do around 44%.”

“Our proactive management reflects this and demonstrates that we are structurally better business today with equipment margins forecast just above 18% despite unfavorable mix in a rapidly shifting global environment.”

“Given the pullback we've seen in ag markets, we now expect to end the year moderately below mid-cycle levels.”

“Our guide is also supported by an order book for earthmoving equipment that extends out approximately 4 months into the fourth quarter.”

“Furthermore, we expect to see the largest decline in new inventory levels to occur during the fourth quarter as normal year-end seasonal declines are amplified by our planned underproduction for the year.”

“That said, given our proactive underproduction previously discussed, we expect these numbers to fall by year-end with beginning 2025 inventory to sales ratios down significantly from where they stand today.”

“We're continuing to manage working capital and expect further reductions throughout the remainder of the year.”

“We ended 2023 with really low levels of large tractor inventory, but we think it's prudent to drive those levels even lower as we close out our '24.”

“we'll continue to take action on costs throughout the remainder of the year while still investing in our future.”

“Notably, our production volumes will decline more than demand in the back half as we're taking proactive steps to drive down field inventories.”

“Given the environment that I just mentioned, we do expect incremental demand decline in the back half of 2024.”

“And lastly, cash flow from the equipment operations is now projected to be in the range of $7 billion to $7.25 billion.”

“Next, our guidance incorporates an effective tax rate between 23% and 25%.”

“For fiscal year '24, our outlook for net income is now expected to be approximately $7 billion.”

“For fiscal year 2024, our outlook for net income remains at $770 million as benefits from a higher average portfolio balance offset a higher provision for credit losses and less favorable financing spreads.”

“The segment's operating margin is projected to be around 17%.”

“2024, net sales remain forecasted to be down between 5% and 10%.”

“The segment's operating margin is now between 13.5% and 14.5%, in line with slowing net sales.”

“For the segment's operating margin, our full year forecast is now between 20.5% and 21.5% due to demand softening and proactive inventory management.”

“The forecast assumes roughly 1.5% of positive price realization for the full year and minimal currency impact.”

“For Production and Precision Ag, net sales are forecasted to be down between 20% and 25% for the full year.”

“Demand shifts, coupled with proactive inventory management are reflected in our production schedules for the balance of the fiscal year, with many product lines anticipating retail demand under production to close out 2024.”

“we are on track to reach target levels by fiscal year-end.”

“In the short term, we'll be planning a retrofit solution as we bring this to market towards the latter part of '24 and make this more fully available in 2025 and beyond.”

“we would expect these to come through a solution as a service model.”

“But I think our focus area is, yes, we can manage this across these businesses in this range of -- from an equip ops perspective in between 35 and 40. And as we continue to execute, drive that down lower.”

“I would say, we're running right now. If you look at the total equipment operations, our forecast is probably in the range of 37%, 38% overall kind of across the businesses.”

“Yes, Nicole, I think from a seasonality perspective, I think '24 looks a lot like '23, a more normal distribution in terms of quarterly splits. So expecting the strongest top line margin in 2Q would remain.”

“PPA, though, it's a little bit of a different story. That's a little bit more back half loaded. Q3, Q4, I think where you'll see more of the reduction coming out of the PPA segment.”

“I mean, I think as you look at overall equipment operations, we'd expect Q2 to be down relatively more than the down for the rest of the year, although pretty, pretty close.”

“I'd say, from the underproduction -- underproducing in Brazil, which we planned on and we're executing on in the first quarter and then Europe, that's probably about 1 point drag of operating margin for production precision ag.”

“As John noted, we expect to perform better across all points of the cycle, as evidenced by our nearly 19% equip ops operating margin forecast just below mid-cycle levels, while remaining focused on managing production and inventories proactively.”

“As we've noted, we'll underproduce in some regions, which will impact decrementals, as we dial down production faster than we realized savings from pulling levers.”

“As noted previously, we expect the impact of these savings to drive year-over-year production cost favorability for our equipment operations, despite headwinds in other spend categories.”

“Looking forward, Deere inventory levels have recovered and are now in line with the industry. We expect slightly stronger sales through the back half of the year, which is embedded in our updated outlook.”

“We are seeing demand shifts in production of precision ag, impacting combines and large tractors, which is felt mostly in the back half of 2024.”

“Notably, we don't expect the first quarter to be indicative of our SA&G run rate for the rest of the year, as we're pulling levers in line with the rest of our operations.”

“This is aligned with our expectations to see slightly favorable production cost compares for both segments for the full year.”

“It's worth noting, however, that we expect price realization to moderate throughout the remainder of the year in line with our annual guide of 1.5 points for both segments.”

“For both Europe and Brazil, our intent is to position 2024 year-end inventory so that we can produce in line with retail demand in 2025.”

“In Europe, we'll underproduce demand for the remainder of 2024 in response to softening market conditions.”

“There's certainly caution in the market, particularly in the high interest rate environment that we're seeing, but we still expect to see replacement demand in both regions.”

“And lastly, cash flow from the equipment operations is now projected to be in the range of $7 billion to $7.5 billion.”

“Next, our guidance incorporates an effective tax rate between 24% and 26%.”

“For fiscal year 2024, our outlook for net income is now expected to be between $7.5 billion and $7.75 billion.”

“For fiscal year 2024, our outlook remains at $770 million, as benefits from a higher average portfolio balance offset less favorable financing spreads.”

“The segment's operating margin remains projected between 17% and 18%.”

“2024 net sales are now forecasted to be down between 5% and 10%.”

“The segment's operating margin remains between 15% and 16%.”

“We expect net sales to remain down between 10% and 15%.”

“Needless to say, we expect infrastructure spending to provide a strong tailwind well into '25 and '26 across both our construction and road building segments, as dollars are awarded and projects commence.”

“So we wouldn't expect to see any segment go negative through the course of 2024.”

“Meanwhile, 4-wheel drive tractors are sold out through the end of the third quarter, reflecting continued strong demand and restricted availability for the product line in 2024.”

“But I would say, all in all, given the cash we expect to generate, we'll be able to handle all of our use of cash priorities from investing in the business, organic and inorganic, the dividend as well as using residual cash to repurchase shares.”

“So we'll be up slightly from an R&D perspective. So we're talking $2.2 billion or more.”

“I mean in short, Tim, you add up those bars for production costs, they should be green is our current expectation for production cost in '24.”

“That market continues to be affected by the slowdown in single-family housing starts and can also be relatively sensitive to interest rate increases. And so, as that end market continues to be slow, we'll underproduce yet another year in 2024.”

“We will see some carryover early in the year, but we would expect the entire year to remain positive for all 3 segments.”

“And we look to get more of that back over the course of 2024.”

“And then logistics will be another area of focus. And I think we're seeing that come down across really all forms of logistics from rail, ocean, trucking and airfreight as well.”

“Regarding our cost management for 2024 and sort of the level of structural profitability embedded in the business, you'll see that some of our most profitable markets are down from a top line perspective. So production and precision ag will be down 15% to 20%, while at the same time, maintaining a 35% decremental.”

“Our teams remain focused on cost management, and I expect we'll see the benefit of these efforts as we move forward.”

“Our 2024 guide implies that overall production costs will be slightly favorable for the full year.”

“As we look forward into 2024, we remain focused on continuing to tackle inflationary costs, and we think there's substantial opportunity across both direct and indirect material as well as logistics and overhead.”

“Meanwhile, our autonomy journey is progressing nicely with plans for acreage expansion through our paid pilots in 2024.”

“We are targeting a significant push for premium into the installed base in 2025, supported by our Solutions as a Service business model.”

“Given the continued headwinds and a competitive market environment, we expect orders for 2024 to be down in line with industry demand.”

“While our combine Early Order Program does not finish until the end of November, we expect volumes to be down double digits when compared to 2023.”

“So similar to last year, we expect the first quarter top line to be down 20% to 25% sequentially and for first quarter margins to be 300 to 400 basis points lower than the full year guide.”

“And we expect that 2024 will be much the same, meaning we'll see the highest levels of production in the second and third quarter, aligning with the primary use periods for farm and construction equipment.”

“I think the implication is at the bottom of the cycle, we would expect to perform significantly better than we have in the past as well.”

“And so as we intend to produce in line for new next year, combined with better inventory management on the new side, we think that balance of new and used should be relatively healthy going into 2024.”

“So that we actually may have a little further inventory build yet to come in 2024, but it will be an inventory build to a lesser extent than what happened in 2023.”

“Finally, North American yields are coming in better than expected, which could drive some tax buying for used equipment during the remainder of the calendar year.”