Deere & Company NYSE: DE reported higher third-quarter revenue and raised its fiscal 2026 outlook, citing operating execution, improving inventory health and continued strength in its construction and small agriculture businesses despite soft conditions in portions of the global farm-equipment market.
Net sales and revenues rose 5% from a year earlier to $12.61 billion, while equipment-operations net sales increased 6% to $11.0 billion. Net income attributable to Deere was $1.38 billion, or $5.10 per diluted share. Equipment operations produced a 14.4% operating margin during the quarter.
“This quarter's result reflects strong execution across all business segments amid a dynamic market and evolving operating environment,” Chris Seibert, Deere's director of investor relations, said on the call. He said factory output exceeded expectations and that disciplined execution and favorable pricing helped results surpass the company's expectations for revenue and profitability.
Full-Year Outlook Raised
Deere increased its fiscal 2026 net-income forecast to a range of $4.75 billion to $5 billion. The company also lifted its expected equipment-operations cash flow to between $5 billion and $5.5 billion. Its outlook continues to assume an effective tax rate of 24% to 26%.
Brent Norwood, Deere's chief financial officer, said the company has a strong fourth-quarter order book across its businesses, enabling it to tighten some forecast ranges while improving its income and cash-flow outlook.
Worldwide Financial Services generated third-quarter net income attributable to Deere of $219 million, helped by favorable financing spreads, partly offset by a lower average portfolio. Deere raised its full-year Financial Services income forecast to $870 million.
Segment Performance Varied
- Production & Precision Ag: Net sales fell 6% year over year to $4.0 billion, primarily because of lower shipment volumes. Favorable price realization and currency translation partly offset the volume decline. Operating profit was $527 million, producing a 13.2% operating margin.
- Small Ag & Turf: Net sales increased 12% to $3.38 billion, driven by higher shipment volumes and favorable pricing. Operating profit rose to $622 million, and operating margin was 18.4%.
- Construction & Forestry: Net sales grew 18% to $3.62 billion, supported by higher volumes and favorable pricing. Operating profit totaled $436 million, for a 12.1% operating margin.
For the full year, Deere now expects Production & Precision Ag sales to decline about 10%, with an operating margin of 11% to 12%. The company said softer conditions in South America and Europe drove the revised sales outlook.
Small Ag & Turf sales are still expected to rise about 15% for the year, while the segment's operating-margin forecast was increased to 14.5% to 15.5%. Construction & Forestry sales are projected to rise about 20%, with a narrowed operating-margin forecast of 10.5% to 11.5%.
Agricultural Markets Remain Uneven
Deere continues to expect large agricultural equipment sales in the U.S. and Canada to decline 15% to 20% in fiscal 2026, as producers contend with muted profitability, elevated input costs and uncertainty around commodity markets. The company expects the U.S. and Canadian small agriculture and turf market to be flat to up 5%.
In South America, Deere now expects industry sales to decline 15% to 20%, citing high production costs and interest rates. The company expects European industry sales to be approximately flat, while its outlook for Asia also calls for approximately flat industry sales.
Deanna Kovar, president of Deere's worldwide agriculture and turf division, said demand weakened in South America and Europe during the quarter, while North American conditions were stable. Deere's Production & Precision Ag order books are effectively full for the year, she said.
Kovar said Deere has adjusted production in South America to run modestly below retail demand, seeking to enter fiscal 2027 with healthy inventories. In North America, new-equipment inventories remain tight, while late-model used equipment inventory has improved. Used model-year 2023 and 2024 high-horsepower tractor inventories are down nearly 40% from a year earlier, she said.
The company's early-order programs for model-year 2027 sprayers and planters were running in the mid-single-digit percentage range above the prior year at the time of the call. Kovar said the results support Deere's view that fiscal 2026 represents the bottom of the agricultural equipment cycle, though she expects any recovery in 2027 to be measured rather than sharp.
Construction Demand and Technology Adoption
Deere raised its outlook for U.S. and Canadian construction-equipment industry sales to growth of 5% to 10%, supported by large infrastructure, data center and energy-related projects. It expects compact construction equipment sales to rise about 5% and global road-building equipment sales to increase about 10%. Global forestry equipment sales are projected to decline 10%.
Seibert said Construction & Forestry order books extend four to five months, with customer backlogs reaching well into fiscal 2027. Deere is producing modestly below retail demand in the business, which it said should leave dealer inventories in a healthy position heading into next year.
The company also highlighted rising adoption of its technology products. Factory-installed SmartGrade adoption in construction increased more than 50% year to date, while sales of job-site safety solutions rose nearly 40% year over year.
In agriculture, Kovar said customers using Deere's See & Spray technology achieved more than 50% herbicide savings, and factory adoption is expected to nearly double, with the system included on about one-third of North American sprayers on order. Deere also reported more than 520 million engaged acres and nearly 1.2 million connected machines in its John Deere Operations Center digital ecosystem.
Tariff Expense and Refunds
Deere recognized $110 million of incremental tariff-related refunds during the third quarter, bringing fiscal-year refunds recognized to $382 million. Seibert said the company's current outlook assumes no additional refunds for the balance of the year.
The company now expects direct tariff expense of about $1.1 billion for fiscal 2026, excluding refunds, down from its prior $1.2 billion expectation. Seibert attributed the change largely to revised Section 232 tariff policies affecting imports from Europe.
Norwood said Deere expects net tariff expense of roughly $750 million in fiscal 2026 after refunds, compared with an anticipated run rate of about $1 billion in fiscal 2027. As a result, he said tariffs are expected to be a headwind next year compared with fiscal 2026.
About Deere & Company (NYSE:DE)
Deere & Company, commonly known by its brand John Deere, is a global manufacturer of agricultural, construction and forestry machinery, as well as turf care equipment and power systems. Founded in 1837 by blacksmith John Deere—who developed a polished steel plow to improve tillage in tough prairie soils—the company is headquartered in Moline, Illinois, and has grown into one of the largest and most recognizable names in equipment manufacturing worldwide.
The company's principal businesses include a broad portfolio of agricultural equipment such as tractors, combines, planters, sprayers, harvesters and tillage implements, complemented by precision agriculture technologies and telematics that support farm management, yield optimization and equipment connectivity.
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