John Deere Financials: The Secret to a 40% Faster DSO?

What is John Deere's secret to fast financial efficiency? From high tech to strategic local sourcing, Deere's unique approach makes a difference. What are they doing that others aren't?

We're going to cover John Deere financials today—the man behind those green, gigantic tractors you see everywhere on farms!

Deere & Company has been in the news of late, boasting some mouth-watering numbers. The company's stock price is currently positioned at $371.98, which places the valuation of the company at nearly $103 billion.

We witnessed the stock of Deere gain 12.5 percent in March, riding the good news in the farming sector. Investors are moving money towards dependable, dividend-paying stocks like Deere.

It's not all about stock price, though. Now we need to check the current state of John Deere's financial financial health by focusing on O2C metrics: DSO—how fast does Deere get paid?—DIO—how long are products stored?, CCC—the total time to turn products into cash, and finally, DPO—how long Deere takes to pay the suppliers.

Stick with me as we plumb deeper to see exactly what they can say about Deere's financial strength and prospects. If you're simply curious or looking to invest, this deep dive will expose how Deere keeps the green machines purring and finances smooth.

Deere Beats Caterpillar by 65 Days in Cash Speed

John Deere has been better than most at managing its cash flow over the last five years. 

Their Cash Conversion Cycle (CCC) averaged ~ 90 days, which is much faster than the industry's 125 days. This shows their efficiency in turning resources into cash.

In 2024, there's been a change. John Deere's CCC has increased to 113 days. Despite this rise, they still outperform competitors. Caterpillar is at 178 days and PACCAR is at 122 days. 

This shows that John Deere remains strong in managing operations, even in tougher times.

But what exactly sets John Deere's financials apart? What strategies contribute to a CCC that consistently beats the competition? Let’s look closer at their DSO, inventory practices, and supplier policies to find out!

John Deere's DSO is 40% lower than its peers

John Deere stands out when it comes to getting paid quickly. Let’s look at their Days Sales Outstanding (DSO) over the last five years:

On average, John Deere has managed a DSO of 43 days, which is much lower than the industry average of 70 days, maintaining a nearly 40% quicker DSO.

Even with a recent rise to 55 days, John Deere is way ahead, especially compared to PACCAR’s 164 days. This means that John Deere can reinvest in its business faster than others, keeping it ahead of the game.

How do digital tools and John Deere Financial solutions impact DSO?

Advanced Digital Tools: John Deere employs tools like the MyFinancial app for easy invoice management and quick payments, streamlining the payment process, and speeding up collection times.

Customized Financing Solutions: John Deere offers personalized financing solutions such as the Multi-Use Account with stringent credit checks, ensuring that only creditworthy customers receive payment terms, and reducing the risk of late payments and bad debts.

John Deere clears inventory 2X faster than Caterpillar

In the manufacturing sector, efficient inventory management is crucial. Companies like John Deere, Caterpillar, and PACCAR handle extensive inventories, including raw materials and finished products. 

John Deere's Days Inventory Outstanding (DIO) over the last five years averaged 80 days, well below the industry average of 105 days, showing strong inventory management.

John Deere's DIO recently increased to 91 days but remains more efficient than Caterpillar's 145 days. 

In contrast, PACCAR excels with a DIO of only 35 days, indicating highly efficient inventory turnover. 

While John Deere still performs well compared to Caterpillar, adopting strategies similar to PACCAR's could further improve its inventory efficiency and competitive edge.

How do John Deere's GPS-guided tractors and real-time monitoring reduce DIO?

Precision Agriculture Technology: John Deere's GPS-guided tractors, like the 8R Series, optimize planting and harvesting, making them essential during peak seasons. This high demand speeds up inventory turnover.

Telematics and IoT for Predictive Maintenance: John Deere's Operations Center monitors equipment like combine harvesters in real-time, predicting part replacements before failures occur. This ensures parts availability, reducing inventory time and preventing machine downtimes.

John Deere pays its suppliers 16 Days quicker than its peers

John Deere has consistently managed its Days Payable Outstanding (DPO) more efficiently than its peers. 

It has maintained an average of 33 days over the past few years. This is well below the industry average of 50 days. 

In the latest data, John Deere's DPO stands at 34 days. This is much lower than PACCAR's 77 days and Caterpillar's 69 days. John Deere's quicker payment cycle differentiates it from competitors like PACCAR and Caterpillar. 

How do John Deere's financing and local sourcing impact its DPO?

Supplier Financing Program Implementation: John Deere's partnership with financial institutions for supplier financing is a critical example. According to Reuters, John Deere’s ability to offer early payment options through banks has allowed them to maintain better payment terms while ensuring that suppliers are paid quickly.

Localized Supply Chain Strategy: During the pandemic, John Deere increased its reliance on local suppliers, reducing dependency on international logistics. As of July 10, 2024, John Deere has 2,154 dealers in the US, with Texas hosting 154 dealers (7% of the total). This substantial presence in Texas supports John Deere's localized supply chain strategy, contributing to their lower DPO.

Green Machines, Faster Cash: John Deere's Winning Formula

The financial and operational strategies are a proof of excellence at John Deere.

Beating the industry average by CCC 35 days, DSO 40% faster than rivals, with a DIO nearly half of the norm, Deere sets the standard.

Its cutting-edge digital tools and tailored financing ensure greater cash inflows, as well as supply chain resiliency, through localized sourcing and supplier financing.

These strategies keep Deere out in front, enabling fast reinvestment and close ties with suppliers.

It's a showcase of efficiency and innovation that makes their green machines—and finances—run like clockwork.