Deere Raises Full-Year Outlook Despite Agricultural Headwinds
The equipment manufacturer lifted its net income guidance to $4.75-5 billion on strong construction demand and tariff refunds, even as large ag equipment sales decline.
Strong Quarter Drives Raised Guidance
Deere & Company reported third-quarter results that exceeded expectations and lifted its full-year net income outlook to $4.75-5 billion, up from prior guidance, despite persistent weakness in large agricultural equipment markets. The company posted net income of $1.379 billion, or $5.10 per diluted share, on revenues of $12.6 billion, up 5% year-over-year (earnings call, 2026-08-20).
Equipment operations achieved a 14.4% operating margin in the quarter, reflecting what executives called "strong execution across all business segments" (earnings call, 2026-08-20). The company also improved its cash flow expectations to $5-5.5 billion for fiscal 2026.
Construction Momentum Offsets Agricultural Weakness
The Construction & Forestry segment delivered 18% sales growth to $3.6 billion, driven by "large-scale infrastructure, data center and energy-related projects" (earnings call, 2026-08-20). Operating margin reached 12.1% as the division maintained its full-year sales guidance of approximately 20% growth.
Chris Seibert, Director of Investor Relations, noted that customer backlogs "now extend well into fiscal year 2027" (earnings call, 2026-08-20). The company increased its industry outlook for U.S. and Canada construction equipment to up 5-10% for the year, while compact construction equipment is expected to rise 5%.
Factory-installed smart grade technology adoption increased more than 50% year-to-date, while job site safety solution sales jumped nearly 40% year-over-year (earnings call, 2026-08-20).
Agricultural Markets Remain Under Pressure
Production and Precision Ag sales fell 6% to $4 billion as the company "trended towards the bottom end" of prior guidance and now expects full-year sales down approximately 10% (earnings call, 2026-08-20). The segment's operating margin was 13.2%.
Deere maintained its expectation for U.S. and Canada large ag equipment industry sales to decline 15-20% as "farm profitability remains muted and producers navigate elevated input costs, commodity price volatility and the ongoing uncertainty around agricultural markets" (earnings call, 2026-08-20).
The company also lowered its South America industry outlook to down 15-20%, reflecting "elevated production costs and higher interest rates" pressuring farm economics (earnings call, 2026-08-20). Europe's industry outlook was revised to approximately flat.
Small Ag and Turf provided a bright spot, with sales up 12% to $3.4 billion and operating margin of 18.4%. The segment maintained its full-year sales guidance of up approximately 15%, with operating margin guidance increased to 14.5-15.5%.
Tariff Refunds Boost Results
Deere recognized $110 million in incremental tariff refunds during the third quarter, bringing total fiscal 2026 refunds to $382 million (earnings call, 2026-08-20). The company expects direct tariff expenses of approximately $1.1 billion for the fiscal year, excluding refunds.
Financial Services reported net income of $219 million in the quarter, benefiting from favorable financing spreads. The division's full-year outlook increased to $870 million.
This article was generated by MarginX from the earnings call on 2026-08-20. It is not investment advice.