Deere’s Stock Dips Despite a Strong Q4 — Tough Year Ahead for Farm Equipment
Deere & Company just dropped a mixed bag on the market
Deere & Company just dropped a mixed bag on the market. Their Q4 numbers beat expectations, but the outlook for 2026 is dragging the stock down. Investors got hit with some blunt talk about tariffs, margin pressure, and a slow recovery in the big ag sector.
Deere & Company (DE)
Financial Score: 97 / 99
Quick Tip
To keep your portfolio strong, stay on top of the financials for each company you hold. Solid companies mean better returns, so be sure to check in on their quarterly and annual numbers.Interesting stocks usually score 80+ on the Financial Scale, with top players hitting 90+. If that score dips below 80, it might be a good time to consider cutting ties before things take a turn.Solid Quarter, But Full-Year Outlook Disappoints
In Q4, Deere posted earnings per share of $3.93, beating estimates, with revenue up 11% to $12.39 billion. Production & Precision Ag sales grew by 10% to $4.74 billion, Small Ag & Turf climbed 7% to $2.46 billion, and Construction & Forestry soared 27% to $3.38 billion. For a company often tied heavily to farming cycles, these numbers were pretty encouraging on the surface.
However, that upbeat quarter was overshadowed by the company’s 2026 forecast. Deere expects next year’s net income between $4.0 billion and $4.75 billion, well below the $5.19 billion analyst consensus. The CEO, John May, was upfront that “difficult market conditions” will stick around, citing ongoing tariff hits and stubborn problems in the large agriculture sector. He pointed out that “2026 will mark the bottom of the large ag cycle,” so we can expect the tough times to persist before any real bounce.
Segment Outlooks Show a Mixed Picture
Looking ahead, Deere sees Production & Precision Agriculture sales shrinking 5% to 10% in 2026, reflecting ongoing headwinds with big-ticket farm gear. Meanwhile, the Small Ag & Turf and Construction & Forestry segments are expected to continue growing, each by about 10%. The latter is staying strong thanks to infrastructure spending and the forestry recovery, which is cushioning the farm softness.
Despite the revenue gains in Q4, profitability took a hit. Operating profit slipped in the core ag segment due to higher production costs, tariffs, and warranty expenses—especially in Small Ag & Turf. That unit’s operating profit plunged dramatically compared to last year, dragging overall margins down. Construction & Forestry margins improved slightly thanks to volume gains.
Why Tariffs and Market Pressure Are Still a Big Deal
Tariffs are hitting Deere hard, with a pre-tax tariff hit for 2026 estimated at $1.2 billion, double the $600 million from 2025. These costs are making it tough to keep margins stable, especially on large, expensive equipment. Tariffs, combined with slack demand in farming from low crop prices and more equipment rentals, mean a headwind for the foreseeable future.
The global ag landscape isn’t doing Deere any favors either. Farmers face tighter budgets, and supply chain issues and inflationary pressures are raising costs without translating fully into higher prices. Deere’s cautious stance shows it’s bracing for a prolonged recovery period, but growing focus on smart industrial tech and precision ag should help over the long term.
Long-Term Strategy: Smart Tech and Efficiency
Despite the short-term drama, Deere’s playing a long game. Their smart industrial journey launched in 2020, incorporating AI, automation, and data analytics into equipment and operations. This tech pivot is starting to pay off with more efficient machines and recurring software revenue streams, a strategy expected to drive higher margins down the road. CEO John May called the progress “structurally higher performance levels” even amid tough conditions.
The company’s Investor Day on December 8th at the NYSE will likely lay out more on these growth drivers, showing how Deere plans to balance current market softness with innovation.
Stock Impact and What to Watch
Shares slid about 4% after the report, trimming some gains — year-to-date, Deere’s up roughly 13%, trailing the S&P 500’s 15% pace. Investors are digesting the message that the agricultural cycle’s not turning around yet.
If you’re in this for the long haul, Deere’s mix of strong infrastructure and forestry segments plus smart tech bets offers growth avenues despite the tough ag environment. The market is pricing in the short-term pain, but when that big ag cycle bottom breaks in 2026 as management expects, Deere could be positioned for the rebound.
For now, keep an eye on:
How tariffs evolve post any new trade talks.
Crop prices and farmer equipment buying behavior in the first half of 2026.
Updates on Deere’s AI and automation tech rollout.
This isn’t a “buy at any price” moment, but if you’re a patient investor with conviction in Deere’s market dominance and tech edge, the long-term story remains compelling.
Someone’s sitting in the shade today because someone planted a tree a long time ago. ― Warren Buffett.
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