Deere & Company (DE) — Earnings Preview Memo
Key Preview Takeaways
| Factor | Details & What to Watch |
|---|---|
| FY2026 Guidance | Net income guidance raised to $4.75B–$5.00B (from $4.5B–$5.0B); cash flow from ops $5.0B–$5.5B. |
| Consensus Estimates | Q4 2026 revenue: $10,354M; EPS: $4.06; FY2026 revenue: $41,122M; EPS: $18.11. |
| Y/Y Comparable | Q4 2025 revenue: $9,811M; net income: $1,038M; EPS: $3.83. Q4 2026 faces a relatively easy comp (+6%). |
| Segment Trends | Construction & Forestry (C&F) and Small Ag & Turf (SAT) remain strong; Large Ag (PPA) at cycle trough. |
| Tariff Impact | FY26 net tariff expense now $1.1B (down from $1.2B), but Q4 will lack the refund tailwind seen in Q2/Q3. |
| Order Book/Backlog | Order books for C&F and PPA are full into Q4; early order programs for 2027 up mid-single digits. |
| Pricing/Mix | Pricing covers inflation; tech adoption (See & Spray, ExactShot, etc.) is rising, supporting mix/margin. |
| Key Risks | Input cost volatility, South America/Europe ag softness, no further tariff refunds expected in Q4. |
Summary and Conclusions
- Deere enters Q4 2026 with positive momentum: Net income guidance was raised to $4.75B–$5.00B, reflecting strong execution, robust C&F/SAT demand, and improved order books.
- Q4 2026 faces an easier y/y comp: Q4 2025 revenue was $9,811M; consensus for Q4 2026 is $10,354M (+6%). EPS consensus is $4.06 vs. $3.83 last year.
- Tariffs remain a headwind: Net tariff expense for FY26 is $1.1B (down from $1.2B), but Q4 will not benefit from the $382M in refunds recognized earlier in the year.
- Segment divergence persists: C&F and SAT are driving growth and margin expansion; Large Ag (PPA) remains at trough, but early order programs for 2027 are up mid-single digits, suggesting a bottoming.
- Key watch items for the print: Margin progression (especially without tariff refunds), order book commentary for 2027, pricing/mix trends, and any updates on input cost or geopolitical risks.
Quarterly Financial Snapshot — Actuals and Consensus
Quarterly Results and Consensus ($M except EPS)
| Quarter | Revenue | Gross Margin (%) | EBITDA | Net Income | EPS | Cash Flow/Share |
|---|---|---|---|---|---|---|
| Q3 2026 | 10,734 | 26.85 | 1,927 | 1,255 | 4.71 | 14.23 |
| Q4 2026E | 10,354 | 26.8 | 1,767 | 1,082 | 4.06 | 7.78 |
| Q4 2025 | 9,811 | 26.68 | 1,659 | 1,038 | 3.83 |
Q4 2026E = consensus estimate; Q4 2025 = actual reported
Full-Year Results and Consensus ($M except EPS)
| Fiscal Year | Revenue | Gross Margin (%) | EBITDA | Net Income | EPS | Cash Flow/Share |
|---|---|---|---|---|---|---|
| FY2026E | 41,122 | 27.26 | 7,548 | 4,889 | 18.11 | 23.29 |
| FY2025 | 38,146 | 28.48 | 7,172 | 4,998 | 18.45 | 20.74 |
| FY2024 | 44,717 | 30.70 | 10,083 | 6,919 | 24.89 | 25.22 |
FY2026E = consensus estimate; FY2025 and FY2024 = actual reported
Guidance Summary — FY2026 (as of Q3 2026 call, Aug 20, 2026)
| Metric | Guidance (FY2026) | Prior Guidance (Q2) | Notes/Context |
|---|---|---|---|
| Net Income | $4.75B–$5.00B | $4.5B–$5.0B | Raised on Q3 call |
| Equipment Ops Cash Flow | $5.0B–$5.5B | $4.5B–$5.5B | Raised on Q3 call |
| Effective Tax Rate | 24%–26% | 24%–26% | Unchanged |
| PPA Net Sales | Down ~10% YoY | Down 5%–10% | Lowered to bottom of range due to SA/EU softness |
| PPA Operating Margin | 11%–12% | 11%–13% | Narrowed to lower end |
| SAT Net Sales | Up ~15% YoY | Up ~15% | Unchanged |
| SAT Operating Margin | 14.5%–15.5% | 13.5%–15% | Raised |
| C&F Net Sales | Up ~20% YoY | Up ~20% | Unchanged |
| C&F Operating Margin | 10.5%–11.5% | 10%–12% | Narrowed |
| Financial Services Net Income | $870M | $860M | Raised |
| Tariff Expense (net) | $1.1B | $1.2B | Excludes $382M refunds YTD; Q4 will not have refund tailwind |
Segment Outlook — FY2026
| Segment | Net Sales Guide | Margin Guide | Key Commentary |
|---|---|---|---|
| Production & Precision Ag (PPA) | Down ~10% YoY | 11%–12% | SA/EU softness, NA stable, order books full, EOPs up mid-single digit |
| Small Ag & Turf (SAT) | Up ~15% YoY | 14.5%–15.5% | Dairy/livestock margins strong, turf recovering, India solid |
| Construction & Forestry (C&F) | Up ~20% YoY | 10.5%–11.5% | Infra/data center/rental demand strong, order books full into 2027 |
Key Factors to Watch This Quarter
- Margin Progression: Q4 will lack the $382M in tariff refunds that boosted Q2/Q3 margins. Monitor if underlying margin strength persists.
- Order Book/Backlog: Order books for C&F and PPA are full into Q4; early order programs for 2027 up mid-single digits, suggesting a bottoming in large ag.
- Pricing and Mix: Management states EOP pricing covers inflation; tech adoption (See & Spray, ExactShot, FurrowVision) is rising, supporting mix/margin.
- Segment Divergence: C&F and SAT are driving growth and margin expansion; PPA remains at trough, but signs of recovery are emerging.
- Tariff Headwinds: FY26 net tariff expense is $1.1B (down from $1.2B), but Q4 will not benefit from prior refunds.
- Input Cost and Geopolitical Risks: Volatility in fertilizer/oil costs and global trade/policy could impact ag demand, especially in South America and Europe.
How Did They Report Last Year? (Q4 2025)
| Metric | Q4 2025 Actual | YoY Change vs. Q4 2024 |
|---|---|---|
| Revenue | $9,811M | |
| Net Income | $1,038M | |
| EPS | $3.83 |
- Q4 2025 was a trough quarter for large ag, with C&F and SAT also coming off underproduction periods.
- Q4 2026 faces a relatively easy comparable, with consensus expecting +6% revenue growth and +6% EPS growth.
Management Commentary — Recent Tone and Intra-Quarter Color
- On Cycle Position: "We continue to believe that 2026 represents the bottom of the ag equipment cycle. While the recovery is likely to be measured and is expected to vary by region, the underlying trends are moving in the right direction."
- On Order Books: "Order books for 2026 are largely full as demand fundamentals remain favorable across both the earthmoving and road building end markets... customer backlogs now extend well into fiscal year 2027."
- On Pricing: "Our focus remains on covering inflation with our pricing. And we've done that across the EOP products and also across all of the PPA portfolio as we roll towards 2027."
- On Technology Adoption: "Factory installed SmartGrade adoption has increased more than 50% year-to-date... factory adoption of See & Spray will nearly double with the technology included on about 1/3 of North American sprayers on order."
- On Tariffs: "Net tariffs, so direct tariffs paid less any refunds will be a headwind going into next year. We'll end up paying about $1.1 billion in direct tariffs this year, less $382 million of refunds."
What Changed Since Last Quarter
- Guidance Raised: Net income and cash flow guidance increased on Q3 call.
- Tariff Refunds: $382M in refunds recognized YTD; Q4 will not have this tailwind.
- Segment Guidance: PPA sales/margin guide narrowed to lower end; SAT margin guide raised; C&F margin guide narrowed higher.
- Order Programs: Early order programs for 2027 up mid-single digits, with strong tech adoption rates.
- C&F Strength: C&F order books/backlogs extend into 2027, driven by infrastructure/data center/rental demand.
Conclusion
Deere is set up for a solid Q4 2026 print, with easier comps, raised guidance, and strong C&F/SAT performance offsetting trough conditions in large ag. Key factors to watch are margin sustainability without tariff refunds, order book commentary for 2027, pricing/mix trends, and any updates on input cost or geopolitical risks. The company’s diversified portfolio and disciplined execution position it well for a measured recovery in large ag and continued growth in construction and turf.
