From Dirt to Dollars: How Deere & Co Is Plowing a Path to Profit

Apr 30, 2025

Welcome back to Part II of this agricultural adventure—strap in, because we’re trading in hay bales for horsepower. In Part I, I took a quick detour through the world of farming, asking big questions like, “What makes farmers tick?” and “How does one even begin to understand this noble, dirt-under-the-nails profession?” Now, we’re turning our spotlight on one of the biggest names to ever roll across a cornfield: Deere & Co.

Let’s rewind to 1837. Illinois. A blacksmith named John Deere sets up a modest tool repair shop. Harmless enough—until he invents the self-scouring steel plow, a brilliant contraption that lets farmers breeze through sticky Midwestern soil like it’s butter on a hot skillet. Cue the montage music, because things took off from there.

The Self-Scouring Steel Plow - Source: Wikipedia

Fast-forward to today, and that humble repair shop has turned into a green-and-yellow juggernaut listed on the NYSE, sporting a market cap of about $125 billion. That’s not just a big tractor—that’s a big deal. During a recent S&P 500 scan, Deere caught my eye with some juicy numbers: high margins, decent valuation… the kind of stats that make investors lean in.

But before we start throwing around phrases like “undervalued gem” or “once-in-a-generation buy,” we need to understand what Deere is really about.

And that, my friends, is today’s mission.

We're starting on the sunny side of the SWOT: Strengths and Opportunities. I’ll be ignoring all the flaws today—intentionally—because optimism deserves its time in the sun. Next week? We switch gears and dig into the dirt. We’ll answer the spicy question: “What if you did want to short Deere & Co?”

So don’t forget to subscribe or slap a Post-it on your fridge—because this story’s got more to plow through.

For now, refill your coffee, slip on those rose-colored shades, and let’s see what makes Deere & Co such a green machine.

Strategy

Ah yes, here it is—the crown jewel of corporate vision statements, straight from Deere & Co’s investor presentation:

“Unlocking customer economic value across the lifecycle in ways that are sustainable for all.”

Elegant. Vague. Packed with buzzwords. But beneath the jargon lies the beating heart of the Deere strategy.

Let’s unpack that beauty, one corporate catchphrase at a time:

Customer economic value – Translation: “Let’s help our customers make money.”
Across the lifecycle – “Let’s keep helping them make money... forever.”
Sustainable – “Let’s not torch the planet while we’re at it.”

In essence, Deere & Co’s mission is refreshingly straightforward: build long-term relationships with customers by giving them tools that create value over time—without setting the Earth on fire. A noble ambition, no sarcasm intended.

But noble words only get you so far. How does Deere actually do this? Glad you asked.

Let’s break it down by looking at Deere & Co’s four main business units—each one a cog in this green, value-generating machine:

Production & Precision Agriculture

This is the Big Leagues. Think of those iconic green tractors serenely gliding across endless fields. These are the workhorses—the combines and machines that make industrial-scale farming possible. They also rake in the cash, contributing roughly 40% of Deere’s revenue.

Small Agriculture & Turf

This is the little brother—smaller tractors, turf equipment, and lawn mowers. Perfect for hobby farms, livestock chores, and golf courses that need to look like Augusta National. This unit pulls in about 21% of the pie.

Construction & Forestry

Hard hats on. This segment is all about heavy-duty construction and land-moving machinery—dozers, excavators, and all the earth-rumbling gear you’d expect on a job site or deep in the woods. It’s a big one, accounting for around 25% of revenue.

Enabling Business

This is the brains and backbone—after-sales services, smart tech, and financial solutions. It may not look as cool as a shiny new combine, but it’s where long-term value is made. Financial services bring in around 12%, while the rest (think software and support) chip in a modest <3%.

As you can see, revenue diversification is a strong point of Deere & Co.

Long-Term Partnerships

What Deere is realizing—smartly—is that relationships are the real harvest here. Sure, the hardware should be built to last. That’s the hook. But the long-term goldmine? Services. Repairs, software upgrades, tech support, financing... rinse and repeat.

The result? Customers get rugged, ever-improving tools. Deere gets predictable, recurring revenue.

Win-Win.

Now, I’m not here to forecast the next ten years of green machinery greatness (although, let’s be honest, that’d be fun). Deere already knows where it’s heading. Just look at this bold little nugget from their investor presentation:

“We are investing in a Solutions as a Service business model to increase technology adoption and utilization by our customers. Solutions as a Service products did not represent a significant percentage of our revenues.”

Translation: “We’re going all-in on tech, and this is just the beginning.”

They’ve been pouring resources into intelligent solutions since 1999—Autonomy being the newest frontier. And based on the rising curve of their investment timeline, Deere isn’t playing around.

Areas of Technology - Source: Deere & Co

So, we’ve nailed down the “customer economic value” and “lifecycle” parts of the mantra.

But what about that last piece—the sustainability bit?

Sustainability

When it comes to sustainability talk, I’ll be honest—I usually raise an eyebrow. This is often the fluffiest section of any annual report. You know the drill: “By 2030, 90% of our operations will run on unicorn tears and recycled fairy dust…”

Charming? Sure. Reality-based? Hardly.

Most of the time, these grand eco-promises are heavier on buzzwords than on actual, executable plans. But when it comes to John Deere, color me (cautiously) optimistic. Why?

Because their customers—the farmers and ranchers of the world—have to get greener.

Livestock farming catches a lot of heat for its environmental impact (and yet, somehow, my love for a perfectly grilled steak remains unwavering). Meanwhile, the heavy-duty equipment used in farming is far from what you’d call “carbon-neutral.” For farmers, going green isn’t just a “nice-to-have”—it’s fast becoming a business necessity.

And when you’re facing big changes, who do you turn to?
Someone you already trust.

Enter Deere & Co.

See where this is looping back to?
That’s right: long-term partnerships, once again stealing the show.

Management

Having a plan is one thing. Actually pulling it off? Whole different ball game. You can build the world’s fastest racecar, but if you stick a clown behind the wheel, you’re still crashing into the first wall you see. That’s why management matters—a lot. And it’s why I need to take a closer look at the captain steering this particular green ship: John C. May.

Background

As an investor, I do my homework. I dig, I read, I connect dots. But let’s be real: I’ll never understand the daily grind of farming better than someone who’s been knee-deep in it for years. That’s what I want in a CEO: someone who doesn’t just know the business but lives and breathes it.

Enter John C. May.

And what a résumé. May joined Deere & Co back in 1997, climbed the ranks like a seasoned mountaineer, and eventually took the CEO seat in 2019, joining the Board a year later. Oh, and as a side quest? He also joined Ford’s Board of Directors.

“Why should I care?” you might wonder. Good question. Here’s a little snippet from Ford’s announcement when they welcomed him:

“Our industry is in an exciting period of disruption, and we’re changing Ford in significant ways with advanced technology and digital connectivity at the center. That’s what Deere is doing in its businesses, making John’s expertise invaluable to our board.”

Translation: The guy knows how to drive tech innovation in industries that weren’t exactly born yesterday.
Getting that kind of hat tip from Ford’s Chairman? That’s bonus points in my book—though I’m fairly certain John C. May doesn’t lose sleep over my approval.

Capital Allocation

Now, let’s talk about money. Because it’s easy to rake in billions in revenue—but if you blow it all like a drunken sailor on shore leave, you’re not a good manager. Capital allocation separates the pros from the posers.

So, what’s the scoreboard say? Let’s check out Deere’s Return on Invested Capital (ROIC) over the last 10 years:

From 2015 until around 2020, ROIC hovered under 8%—decent, but not mind-blowing. Then, starting in 2021, things took off like a rocket: almost 16% in 2023, before cooling slightly to around 11% in 2024.

Keep in mind, it often takes a year (or a few) before newly invested capital actually starts paying off. With that in mind? John C. May seems to know what he’s doing.

The fine details of how they pulled it off are for the financial deep dive. For now, let’s just say this: Deere’s management passed the capital allocation test with flying colors in my eyes.

Final Thoughts

Alright, let’s wrap this green-and-yellow joyride up with a bow.

When it comes to strengths, Deere & Co isn’t just cruising—it’s plowing through the field full throttle. We’re talking industry-defining machinery, a beautifully diversified revenue engine, a laser focus on long-term customer relationships, and a management team that seems to know their torque from their turnover. With John C. May at the wheel, capital is being deployed like a pro—strategically, not sloppily. And let's not forget their ongoing transformation from “just a hardware company” into a full-fledged tech-and-service powerhouse. The margins? Strong. The brand? Iconic. The execution? So far, so good.

As for the opportunities? Oh, there’s fertile ground ahead. From digital farming solutions and autonomy tech, to tapping into recurring service revenue and greening the machinery for eco-conscious customers, Deere is positioned right where disruption meets necessity. Their customers need to adapt to a changing world—and Deere wants to be the one helping them do it. That means more software, smarter equipment, and deeper partnerships across the lifecycle. If they play their cards right, these aren’t just trends—they’re tailwinds.

In short: Deere’s got muscle and momentum. But before we start carving "Buy" into a fence post, remember—we’ve only seen the sunny side so far. Next week, we’ll dig into the weeds. Flaws, risks, and reasons why you might want to short Deere & Co.

So hang tight, keep that coffee warm, and I’ll see you in the mud.

📢 What’s your take on Deere’s strengths and opportunities? Let me know in the comments!