TLDR
- Deere stock dropped 5% despite Q4 earnings of $3.93 per share beating estimates of $3.85
- Fourth quarter revenue climbed 11% to $12.39 billion, topping forecasts of $9.82 billion
- Fiscal 2025 net income declined 29% to $5.027 billion as tariffs and weak demand hit results
- Fiscal 2026 profit guidance of $4.00-$4.75 billion falls short of analyst expectations of $5.33 billion
- Small Agriculture & Turf margins dropped from 10.1% to 1.0% due to tariff impacts
Deere & Company shares slid more than 5% despite delivering fourth quarter results that exceeded Wall Street projections. Investors fixated on the farm equipment maker’s disappointing outlook for fiscal 2026 rather than its near-term performance.
The company reported Q4 earnings of $3.93 per share, beating the consensus estimate of $3.85. Revenue jumped 11% year-over-year to $12.39 billion, well above the $9.82 billion analysts expected.
The surface-level numbers looked strong. But net income actually fell 14% to $1.065 billion from $1.245 billion in the prior year quarter.
Full fiscal year 2025 results painted a clearer picture of Deere’s struggles. Net income dropped 29% to $5.027 billion, or $18.50 per share. The previous year saw earnings of $7.100 billion, or $25.62 per share.
Annual revenue decreased 12% to $45.684 billion. Weak demand for large agricultural equipment drove much of the decline.
CEO John May acknowledged the difficult environment. “This past year brought its share of challenges and uncertainty,” he said. May credited the company’s structural improvements and geographic diversity for helping it navigate the downturn.
Tariffs Crush Profit Margins
Operating margins deteriorated across Deere’s business segments. The Small Agriculture & Turf division suffered the worst damage. Margins in that unit plummeted to 1.0% from 10.1% a year earlier.
Deere blamed the margin collapse on higher tariffs and increased warranty expenses. The company previously estimated a pre-tax tariff impact of nearly $600 million for 2025.
Tariff policies have squeezed manufacturing companies that depend on imported materials. Raw material costs have climbed while pricing power remains limited.
2026 Forecast Misses Expectations
Deere’s fiscal 2026 guidance triggered the stock selloff. The company expects net income between $4.00 billion and $4.75 billion. Analysts had projected $5.33 billion.
The weak forecast reflects multiple headwinds. Lower crop prices have reduced farmer income. Higher operating costs have further strained agricultural budgets.
Farmers have responded by postponing major equipment purchases. Many are opting to rent machinery or buy used units instead of new tractors and harvesters.
Management Sees Cycle Bottom Ahead
May believes the worst may be near. “We believe 2026 will mark the bottom of the large ag cycle,” the CEO stated.
He pointed to ongoing margin pressure from tariffs and continued weakness in large agriculture. But May expressed confidence in Deere’s ability to manage through the downturn.
The company is prioritizing inventory management and cost control. These measures should help preserve cash flow during the difficult period.
Deere has explored multiple strategies to offset weak demand. Options include production shifts to avoid tariffs and expanding used equipment sales. Higher equipment pricing could also help protect margins.
The company expects support from its forestry and small agriculture divisions. These segments serve different customer bases and face separate market conditions.
May confirmed that tariff-related margin pressure will continue through fiscal 2026, particularly in the large farm equipment segment.
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