Deere Earnings Prep: Calling a Return to Better Times
DE has spent two years in one of the deepest agriculture-equipment downturns of the past decade.
Equipment Operations net sales fell from a fiscal 2023 peak of $55.6B to $38.9B in FY25, a 30% decline in two years. Diluted EPS fell from $34.63 in FY23 to $18.50 in FY25, a 47% drop. When Deere reported Q1 FY26 in February, CEO John May said the company believes “2026 represents the bottom of the current cycle.”
Management raised the FY26 net income guide from $4.0-4.75B to $4.5-5.0B at the same time. When Deere reports Q2 FY26 next Thursday morning, the question will be whether the Q1 evidence holds up across a second quarter of data, or whether the floor is still moving.
Deere operates four reportable segments.
Production & Precision Agriculture (PPA) ($17.3B in FY25, 45% of equipment net sales) sells row-crop tractors, combines, and the precision-ag stack to large grain and cotton growers.
Small Agriculture & Turf (SAT) ($10.2B in FY25) sells utility tractors, hay and forage equipment, and turf machinery to smaller producers and commercial landscapers.
Construction & Forestry (CF) ($11.4B in FY25) sells earthmoving, forestry, and roadbuilding equipment, including the Wirtgen Group.
Financial Services (FS) ($890M of net income in FY25, up 28% YoY) finances retail sales, dealer inventory, and leases for the equipment segments.
The cyclical reset hit all three equipment segments hard. PPA operating profit fell from $7.00B in FY23 to $2.67B in FY25, a 62% decline. SAT operating profit fell from $2.47B to $1.21B over the same period, and CF operating profit fell from $2.70B to $1.03 B. Management has held R&D spending at $2.31B in FY25, up from $2.18B at the FY23 peak, signaling that the precision-ag, autonomy, and “Solutions as a Service” strategy is being funded through the cycle rather than cut.
The FY26 outlook frames a divergent recovery: large-ag industry demand in the U.S. and Canada is guided down another 15-20%, but SAT and CF segment net sales are guided up roughly 15% each as construction activity, infrastructure spending, and small-ag replacement demand turn.
So heading into Thursday, here’s what we’re watching:
CF Backlog and Volume. CF backlog grew from $2.2B at FY24 year-end to $3.8B at FY25 year-end, up 73%, the cleanest leading indicator that the cycle has turned. Q1 FY26 CF net sales were $2.67B, up 34% YoY. We’re watching for Q2 CF net sales above $3.2B and segment op margin of 10% or better.
PPA Margin. Q1 FY26 PPA net sales were $3.29B, up 3% from Q1 FY25, but segment operating profit fell to $139M from $338M a year ago, an op margin of 4.2% down from 10.6%. The FY26 outlook is for PPA net sales down 5-10% with margin still under pressure. We’re watching for Q2 PPA op margin at 12% or better, which would suggest the margin trough is in even as volumes stay weak.
SAT Recovery. Q1 FY26 SAT net sales were $2.17B, up 24% YoY, and operating profit was $196M, up 58%. The FY26 guide is for SAT net sales up 15%. We’re watching for Q2 SAT net sales growth of 15% or better, with op margin holding above 10%.
Financial Services Net Income. FS net income hit $890M in FY25, up 28% from $696M in FY24, the highest annual result since FY21 and a meaningful offset to the equipment downturn. Provision for credit losses was $278M, roughly flat with FY24’s . We’re watching for Q2 FS net income above $220M with provision under $80M, which would suggest the captive finance arm is staying healthy even as dealers carry elevated used inventory.
FY26 Guide Update. Deere raised the FY26 net income guide from $4.0-4.75B
to $4.5-5.0B at Q1. We’re watching for another raise, with the bull case mid-point moving toward $5.25-5.50B if Q2 SAT and CF print at or above guide.
Q2 FY26 consensus is roughly $5.71 in EPS, and the stock sits about 15% below its all-time high heading into the report. The number to watch is the FY26 guide. If Deere raises to $4.75-5.25B or higher, and Q2 segment data confirms that CF and SAT are recovering while PPA margin stabilizes, the “bottom of the cycle” call gets validated.
All data via Revelata’s deeepKPI from Deere’s fiscal 2025 10-K, Q1 FY26 10-Q, and quarterly press releases.
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