Dive Brief:
- Deere & Co. is driving more technology into its tractors and equipment as the agricultural manufacturing giant looks to explore additional revenue opportunities, executives said Friday on a third-quarter earnings call.
- Demand for automation products has allowed the company to raise prices on tractors and other equipment. Executives see an opportunity for further revenue gains through the launch of new technologies.
- Deere has accelerated investment in technology, increasing its research and development spending by 15% and pulling some projects ahead into 2023. “It further reinforces our excitement for the future and the opportunities we see ahead,” said CFO Josh Jepsen.
Dive Insight:
Expanding technology services would unlock new revenue streams and allow Deere to better weather potential demand declines.
Although profits were boosted in the third quarter by improvements in the supply chain, the company is taking a wait-and-see approach to building new inventory going into next year. Sales from Deere’s early-order program were mixed compared to the previous year, though the company reported higher demand for products outfitted with its technology solutions.
“Over the last decade, we’ve been on a journey to deliver more value per unit,” Jepsen said. “This is clearly visible today through our higher revenues on lower new units, making us less dependent on new unit sales to drive increased levels of performance. As we continue to execute our strategy, this trend should accelerate even faster over the coming years.”
Take rates for precision agriculture equipment such as ExactEmerge and ExactApply have increased in the mid-single digits every year, according to Brent Norwood, director of investor relations. For the company's premium tractor automation suite, take rates are near 100%.
“So, these things are really driving that higher average selling price,” Norwood said. “And as we begin to launch some of those next-generation technologies, I think we’ve got an opportunity to supplement the higher average selling prices with some recurring revenues as we get into ’25, ’26 and beyond.”
