European Investor
21 May 2026, 14:46
Deere Falls 7.4% as Large Agriculture Slump Overshadows Construction Strength
Deere and Company dropped 7.4% despite reporting overall revenue growth of 5% and maintaining its full-year net income guidance, as investors focused on the deepening pain in its largest and most profitable segment — Production and Precision Agriculture — where sales and margins deteriorated sharply.
Total net sales and revenues for the second quarter reached $13.369 billion, up 5% year over year, with net income coming in at $1.773 billion, or $6.55 per diluted share, essentially flat with last year's $1.804 billion and $6.64 per share. Results included a $272 million recovery related to refunded IEEPA tariff claims following the February 2026 Supreme Court ruling invalidating those tariffs, which partially cushioned the underlying earnings pressure.
The segment picture told two very different stories. Production and Precision Agriculture — the heart of Deere's large farm equipment business — saw net sales fall 14% to $4.503 billion and operating profit collapse 39% to $706 million, with operating margin contracting from 22.0% to 15.7%. The company's own industry outlook calls for US and Canada large agriculture down 15% to 20% for the full year, and South America tractors and combines down approximately 15%, reflecting the ongoing downturn in the global farm equipment cycle driven by lower commodity prices and reduced farmer income.
The offsetting strength came from Small Agriculture and Turf, up 16% to $3.485 billion with operating profit up 25% and margin expanding to 20.6%, and particularly from Construction and Forestry, which surged 29% to $3.790 billion with operating profit up 48% and margin improving to 14.8% from 12.9%. Infrastructure spending and construction activity are clearly filling the gap left by weak large ag demand.
For the full fiscal year, Deere maintained its net income guidance of $4.5 billion to $5.0 billion — a range that acknowledges significant uncertainty but signals management's confidence that the portfolio's diversification can hold the line.
The 7.4% drop reflects a market that looked past the headline revenue growth and construction strength, focusing instead on the severity of the large agriculture deterioration and questioning how long the construction cycle can offset the farm equipment downturn that has become the dominant story for the company's near-term earnings trajectory.
Deere and Company dropped 7.4% despite reporting overall revenue growth of 5% and maintaining its full-year net income guidance, as investors focused on the deepening pain in its largest and most profitable segment — Production and Precision Agriculture — where sales and margins deteriorated sharply.
Total net sales and revenues for the second quarter reached $13.369 billion, up 5% year over year, with net income coming in at $1.773 billion, or $6.55 per diluted share, essentially flat with last year's $1.804 billion and $6.64 per share. Results included a $272 million recovery related to refunded IEEPA tariff claims following the February 2026 Supreme Court ruling invalidating those tariffs, which partially cushioned the underlying earnings pressure.
The segment picture told two very different stories. Production and Precision Agriculture — the heart of Deere's large farm equipment business — saw net sales fall 14% to $4.503 billion and operating profit collapse 39% to $706 million, with operating margin contracting from 22.0% to 15.7%. The company's own industry outlook calls for US and Canada large agriculture down 15% to 20% for the full year, and South America tractors and combines down approximately 15%, reflecting the ongoing downturn in the global farm equipment cycle driven by lower commodity prices and reduced farmer income.
The offsetting strength came from Small Agriculture and Turf, up 16% to $3.485 billion with operating profit up 25% and margin expanding to 20.6%, and particularly from Construction and Forestry, which surged 29% to $3.790 billion with operating profit up 48% and margin improving to 14.8% from 12.9%. Infrastructure spending and construction activity are clearly filling the gap left by weak large ag demand.
For the full fiscal year, Deere maintained its net income guidance of $4.5 billion to $5.0 billion — a range that acknowledges significant uncertainty but signals management's confidence that the portfolio's diversification can hold the line.
The 7.4% drop reflects a market that looked past the headline revenue growth and construction strength, focusing instead on the severity of the large agriculture deterioration and questioning how long the construction cycle can offset the farm equipment downturn that has become the dominant story for the company's near-term earnings trajectory.
