Deere & Company: Income-Statement Shock, Cash-Flow Repair and Balance-Sheet Leverage

Income-statement trends#

Deere & Company [DE] posted a fiscal-year revenue decline to $50.52B in 2024, a -16.15% change from $60.25B in 2023, while net income dropped to $7.10B — a -30.19% fall year over year. That combination — a mid‑teens top‑line contraction with a steeper profit decline — is the defining income-statement development in the supplied FY figures and sets the analytical frame for the rest of the balance-sheet and cash-flow review.

The decline in revenue followed two years of expansion: $43.03B (2021) → $51.28B (2022, +19.18%) → $60.25B (2023, +17.50%) → $50.52B (2024, -16.15%). At the same time gross profit moved from $22.31B in 2023 to $19.50B in 2024 (a -12.60% change) but, because revenue fell proportionally more, gross margin widened slightly. Gross margin in 2024 is 38.60% (19.50 / 50.52), up from 37.02% in 2023 (22.31 / 60.25). The implication is structural: cost of goods sold fell faster than revenue, but the benefit of that higher gross margin was more than offset by pressure below the gross line.

Operating income fell from $14.59B (2023) to $11.43B (2024), a -21.66% decline, producing an operating margin of 22.62% in 2024 (11.43 / 50.52) versus 24.22% in 2023. EBITDA followed the same direction (2023 $17.48B → 2024 $14.67B, -15.99%) with an EBITDA margin staying near 29.04% in 2024. The larger percentage drop in net income (to $7.10B, -30.19%) than in operating income suggests that non‑operating items or financing/other charges had an outsized negative effect in 2024 compared with 2023; the effective tax rate, however, remained roughly stable at ~22.66% in 2024 (income before tax $9.18B → net income $7.10B, (9.18-7.10)/9.18 = 22.66%).

The income-statement table below summarizes the four-year trend and the margins derived from the supplied figures (all values in billions):

The income‑statement story is therefore mixed: top-line contraction with improved unit gross economics but a material drop in operating profit and a deeper net‑income hit. Two embedded signals are worth highlighting: first, R&D and SG&A spend rose in absolute terms (R&D $2.29B in 2024; SG&A $4.51B), increasing their share of a smaller revenue base (R&D ≈ 4.53% of revenue in 2024; SG&A ≈ 8.93%). Second, the company sustained a high absolute EBITDA, keeping margin at near‑cycle levels despite the revenue decline — an indication of operating leverage at work but also of cost structure pressure below EBITDA.

Cash-flow quality#

Operating cash flow showed a recovery in 2024 after a trough in 2022. Net cash provided by operating activities moved from $4.70B in 2022 to $8.59B in 2023 and $9.23B in 2024. The relationship between operating cash flow and reported net income is revealing: OCF / Net Income was +130.18% in 2024 (9.23 / 7.09 = +130.18%), versus +84.49% in 2023 (8.59 / 10.17 = +84.49%) and +66.00% in 2022 (4.70 / 7.13 = +65.94%). That swing reflects major working-capital volatility in 2022–2023 which largely abated in 2024.

Working capital swings materially affected cash conversion: the supplied change-in-working-capital line shows -4.32B (2022) and -3.34B (2023) versus -0.18B in 2024 (negative numbers here indicate a use of cash). The pronounced working-capital drain in 2022–2023 depressed operating cash flow relative to reported earnings; the much smaller working-capital use in 2024 explains why OCF outpaced net income. Put simply, cash conversion quality normalized in 2024 after a two-year working‑capital headwind.

Capital spending rose steadily: capital expenditure moved from -$2.58B (2021) to -$3.79B (2022), -$4.47B (2023) and -$4.80B (2024). Capex as a share of revenue increased to +9.50% in 2024 (4.80 / 50.52), and capex exceeded depreciation (D&A $2.12B in 2024), leaving the company in a net investment posture. Free cash flow (FCF) in 2024 was $4.43B, which is +62.48% of net income (4.43 / 7.09). The FCF margin (FCF / revenue) was +8.77% in 2024 (4.43 / 50.52), versus +6.84% in 2023 and +11.97% in 2021.

Takeaways on cash flow quality: Deere’s underlying operating cash flow recovered and produced solid free cash flow in 2024 despite the revenue decline. The recovery was driven mostly by an easing of working-capital pressure and continued strong underlying EBITDA. At the same time, capex intensity rose and share repurchases resumed at meaningful levels, so the cash-flow profile shows both improvement in conversion and elevated cash deployment.

Balance-sheet changes and leverage#

Total assets grew to $107.32B in 2024 from $104.09B in 2023; non‑current assets rose (property, plant & equipment net $15.45B in 2024, up from $14.21B), consistent with the elevated capex run rate. Cash and cash equivalents were $7.32B at the end of 2024 (cash & short‑term investments $8.48B), roughly flat with 2023. Retained earnings increased to $56.40B (2024) from $50.93B (2023), reflecting cumulative historical earnings retention.

On the liability side, total debt increased to $65.46B (2024) from $63.69B (2023). Net debt (total debt minus cash and equivalents) rose to $58.14B in 2024 from $56.23B in 2023. Shareholders’ equity rose modestly to $22.84B. Those linked movements result in materially higher leverage ratios when calculated from the supplied year‑end balances.

Two balance‑sheet ratios calculated from the supplied year‑end numbers highlight the leverage picture clearly. First, the current ratio using total current assets / total current liabilities is 2.13x in 2024 (77.67 / 36.41), reflecting a solid short‑term liquidity buffer that improved versus 2023 (1.96x). Second, the company’s debt intensity is high: total debt / shareholders’ equity is +286.65% (65.46 / 22.84 = 2.87x) and net debt / equity is +254.57% (58.14 / 22.84 = 2.55x). Net debt to EBITDA is 3.96x (58.14 / 14.67), and EV/EBITDA (using EV = market cap + total debt - cash & short-term investments) is roughly 12.72x (EV ≈ $186.66B; EV / EBITDA = 186.66 / 14.67).

The balance sheet therefore shows improved short-term liquidity but greater leverage: the company has invested (higher PPE), sustained elevated debt, and held cash roughly flat, producing heavier net-debt coverage of EBITDA. These are mechanical outcomes from the combination of higher capex, share repurchases and a weaker earnings year.

Key ratio calculations (2024) — independently derived#

This section lists the principal ratios computed directly from the supplied FY2024 figures and the stock-quote components in the dataset. Where the dataset contains alternative pre‑computed metrics that differ, I prioritize the raw line items and explain divergences below.

Profitability ratios (2024): gross margin = 19.50 / 50.52 = 38.60%; operating margin = 11.43 / 50.52 = 22.62%; net margin = 7.10 / 50.52 = 14.05%; EBITDA margin = 14.67 / 50.52 = 29.04%. These margins show a maintained EBITDA base even as operating and net margins compressed versus the prior year.

Leverage and liquidity (2024): current ratio = 77.67 / 36.41 = 2.13x; total debt / equity = 65.46 / 22.84 = 2.87x (or +286.65%); net debt / equity = 58.14 / 22.84 = 2.55x (or +254.57%). Net debt / EBITDA = 58.14 / 14.67 = 3.96x; EV / EBITDA = (129.68 + 65.46 - 8.48) / 14.67 ≈ 12.72x (market cap used = $129.68B, cash & short‑term investments used = $8.48B).

Capital efficiency and returns (2024): return on equity (ROE) using average equity [(2023 + 2024)/2] = 7.09 / 22.315 = 31.79%; return on assets (ROA) using average assets = 7.09 / 105.705 = 6.71%. Approximate ROIC (NOPAT / invested capital) with NOPAT = operating income * (1 - tax rate) = 11.43 * (1 - 0.2266) = $8.84B and invested capital ≈ net debt + equity = 80.98B, giving ROIC ≈ 10.92%.

Valuation steering metrics (using supplied market data): market capitalization $129.68B and price $478.84 imply shares outstanding ≈ 129.68 / 0.47884 ≈ 270.83M. Using FY2024 net income of $7.09B implies an FY2024 EPS ≈ $26.17 (7.09B / 270.83M) and a FY2024 P/E (price / FY2024 EPS) ≈ 18.30x. Price / sales (market cap / revenue) = 129.68 / 50.52 = 2.57x; price / book = 129.68 / 22.84 = 5.68x. (All ratio calculations use the raw line items supplied above.)

Note on divergences: several pre‑computed ratios in the dataset differ materially (for example, a reported net‑debt / EBITDA figure much lower than the 3.96x calculated here). Those differences arise when third‑party sources use alternate definitions (TTM vs FY, inclusion/exclusion of cash equivalents or short‑term investments, off‑balance-sheet items, or different EBITDA windows). I prioritize the explicit line items in the supplied FY statements for transparency and traceability; users should reconcile to alternative series (TTM, GAAP vs adjusted) when comparing external published ratios.

What this reveals and what to watch next#

The raw numbers reveal three concurrent dynamics: a cyclical revenue contraction from the 2023 peak, a partial margin offset at the gross level, and a step‑up in leverage relative to shareholder equity. The recovery in operating cash flow and solid FCF in 2024 are constructive, but rising capex and persistent debt leave the company more exposed to earnings volatility. In short, cash-generation improved in 2024 while balance-sheet leverage increased — a combination that reduces breathing room should earnings weaken further.

From a monitoring perspective, the most consequential near‑term items (all derivable from the supplied financials) are: whether OCF stays above net income (OCF / net income was +130.18% in 2024), whether capex intensity (capex / revenue +9.50%) retreats or becomes structural, and whether net debt / EBITDA (now 3.96x) compresses toward pre‑cycle levels. Improvements or deterioration in any of those ratios will materially change the financial flexibility picture.

Featured snippet (answer, 40–60 words): Deere’s cash‑flow quality improved in fiscal 2024: operating cash flow recovered to $9.23B and free cash flow was $4.43B, producing an FCF conversion of +62.48% of net income. The improvement was driven largely by a normalization of working capital after 2022–2023 headwinds.

Key takeaways#

Deere’s fiscal 2024 income statement shows a meaningful top‑line reversal from 2023 (-16.15% revenue) with a disproportionate net‑income decline (-30.19%). Gross margins widened, but operating and net margins compressed as operating income fell faster than gross profit. The company sustained solid EBITDA dollars despite the revenue swing.

Cash‑flow quality improved: operating cash flow outpaced net income in 2024 (OCF / net income +130.18%) after working‑capital pressure in prior years eased; free cash flow remained positive at $4.43B even as capex increased to $4.80B. That combination financed dividends and sizeable share repurchases while still increasing net debt.

The balance sheet shows higher leverage. Net debt rose to $58.14B, producing net‑debt / EBITDA ≈ 3.96x and total‑debt / equity ≈ +286.65%. Liquidity is adequate (current ratio 2.13x), but financial flexibility is reduced relative to prior years because of the simultaneous increase in capex, repurchases and debt.

Conclusion#

The supplied FY numbers paint a company that has weathered a sharp cyclical revenue pullback while maintaining operating profitability and restoring cash conversion. That is a constructive combination, but it has come at the cost of higher leverage and elevated investment intensity. The data-driven checklist for ongoing monitoring is clear: watch operating‑cash conversion, capex trends, and net‑debt coverage of EBITDA. Those three items — all directly computed from the supplied financials — will determine whether the 2024 cash‑flow improvement translates into durable financial flexibility or remains temporary.

(Analysis above uses only the provided fiscal-year line items and the dataset's market-cap/price figures; all ratios and percentages were calculated from those raw inputs.)