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01/10 00:31
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed picture: strong Q4 financial performance contrasts with a year-over-year decline in FY 2025 sales. Positive elements include resumed share repurchases in 2026 and optimistic guidance on margin improvements. However, the overall sentiment is tempered by high tariffs, unfavorable geographic mix, and unclear management responses in the Q&A. Given the lack of a market cap and the mixed signals, the stock price reaction is likely to be neutral, with potential for slight volatility due to uncertainties and external factors.
Net sales and revenues (FY 2025) $45.7 billion, down 12% year-over-year. The decline was attributed to lower equipment operations sales, which were down 13% to $38.9 billion.
Net income attributable to Deere & Company (FY 2025) $5 billion or $18.50 per diluted share, representing strong financial performance despite market challenges.
Net sales and revenues (Q4 FY 2025) $12.4 billion, up 11% year-over-year. Equipment operations net sales were up 14% to $10.6 billion, driven by higher shipment volumes and favorable price realization.
Net income attributable to Deere & Company (Q4 FY 2025) $1.1 billion or $3.93 per diluted share, a decrease year-over-year due to higher production costs and tariffs.
Production & Precision Ag (Q4 FY 2025) Net sales of $4.74 billion, up 10% year-over-year. Operating profit was $604 million with a 12.7% margin. The decrease in operating profit was due to higher production costs, tariffs, and special items, partially offset by price realization and higher shipment volumes.
Small Ag & Turf (Q4 FY 2025) Net sales of $2.457 billion, up 7% year-over-year. Operating profit declined to $25 million due to higher tariffs, warranty expenses, and production costs.
Construction & Forestry (Q4 FY 2025) Net sales of $3.382 billion, up 27% year-over-year. Operating profit increased to $348 million with a 10.3% margin, driven by higher shipment volumes and a positive sales mix, partially offset by increased production costs and tariffs.
Worldwide Financial Services (Q4 FY 2025) Net income of $293 million, an increase year-over-year due to favorable financing spreads, special items, and a lower provision for credit losses.
Autonomous Tillage Solution: Deere launched autonomous tillage kits for 8R and 9R tractors, covering over 200,000 acres autonomously. This solution addresses labor shortages and enhances operational flexibility.
See & Spray Technology: Covered over 5 million acres in 2025, saving customers an average of 50% on herbicide costs. A customer reported saving $20,000 in one day using this technology.
Harvest Automation: Introduced harvest settings automation and predictive ground speed automation, achieving a 90% take rate in North America and increasing throughput by 30%.
North America Large Ag Market: Industry sales expected to decline 15%-20% in 2026 due to challenging farm fundamentals, but government support and biofuel demand provide upside potential.
Small Ag & Turf Market: Industry demand in the U.S. and Canada is projected to be flat to up 5% in 2026, supported by strong beef prices and a modest recovery in turf.
South America Market: Industry sales expected to remain flat in 2026, with strong crop yields but tempered equipment demand due to high interest rates.
Construction & Forestry Market: Net sales forecasted to grow 10% in 2026, supported by U.S. government infrastructure spending and increased investments in rental fleets.
Inventory Management: Deere reduced North American tractor inventory by 40% for tractors below 100 horsepower and by nearly 33% for 100-220 horsepower tractors in 2025.
Cost Management: Achieved favorable production costs in 2025, excluding tariffs, driven by material cost reductions and positive price/cost dynamics.
Technology Adoption: Expanded John Deere Operations Center to cover over 500 million engaged acres, with highly engaged acres increasing by 17% year-over-year.
Smart Industrial Strategy: Continued focus on technology-driven solutions, including connectivity, digital engagement, and automation, to enhance customer value and enterprise growth.
Global Diversification: Improved profitability across all business segments and geographies, reducing reliance on North American large ag market.
North American Large Ag Market: The market is expected to decline by 15% to 20% in 2026 due to challenging farm fundamentals, including low commodity prices and high input costs, which are pressuring short-term liquidity for farmers. Used equipment inventory remains a constraint for new machinery investments.
Production Costs and Tariffs: Higher production costs and tariffs are negatively impacting operating margins across segments. For example, direct tariff expenses reduced equipment operations margins by more than 3% in the fourth quarter.
South American Market: Customer demand for equipment in Brazil is tempered by high interest rates and lower profitability for corn and soybean growers due to declining commodity prices and potential trade uncertainties with China.
European Market: While stabilizing interest rates are supportive, arable farmers face challenges from previous periods of caution and the need for improved cash flows to make investment decisions.
Construction and Forestry Segment: The segment faces competitive price pressures and the highest level of tariff exposure among business units, which are tempering operating margins despite higher shipment volumes.
Global Economic and Trade Uncertainties: Uncertainties around global trade agreements, such as the recent U.S.-China trade deal, create risks for export demand, particularly for South American soybeans.
Labor Availability: Labor shortages remain a significant challenge across all production systems, particularly during peak seasons like spring and fall, impacting operational efficiency.
Used Equipment Inventory: High levels of used equipment inventory, particularly in North America, are constraining new machinery sales and require ongoing management to avoid oversupply.
Interest Rate Environment: High interest rates in regions like South America are dampening customer demand for new equipment and impacting overall market growth.
Commodity Prices: Low global commodity prices, driven by strong crop yields and high stocks, are pressuring farm profitability and reducing investment capacity for farmers.
North American Large Ag Industry: Industry sales are expected to decline by 15% to 20% in fiscal year 2026. However, there are positive factors such as strong crop yields, supportive government payments, and growing demand for biofuels that could stabilize the market. Used equipment inventory levels are improving, and the company plans to start the year with lean production while maintaining flexibility to adjust to market demand.
Small Ag and Turf Industry: Industry demand in the U.S. and Canada is estimated to be flat to up 5% in fiscal year 2026. The dairy and livestock sector is expected to remain profitable, driven by strong beef prices. A modest recovery in turf is anticipated, supported by a rebound in the housing market and overall economic growth.
European Ag Industry: Industry sales are projected to be flat to up 5% in fiscal year 2026. Dairy sector margins are robust, and arable farmer margins are strengthening due to recovering crop yields in major European markets. Stabilizing interest rates are expected to support investment decisions.
South American Ag Industry: Industry sales of tractors and combines are expected to remain flat in fiscal year 2026. Soybean and corn acreage in Brazil is expected to grow at a trendline pace, but high interest rates and strong global crop yields are tempering equipment demand. In Argentina, industry growth is anticipated to moderate after robust growth in 2025.
Asian Ag Industry: Industry sales are expected to decline by 5% in fiscal year 2026, following slight gains in India last year.
Production and Precision Ag Segment: Net sales are forecasted to decline by 5% to 10% in fiscal year 2026. Operating margins are projected to be between 11% and 13%, with stability in international markets offset by incremental tariff and mix headwinds.
Small Ag and Turf Segment: Net sales are expected to grow by approximately 10% in fiscal year 2026. Operating margins are projected to be between 12.5% and 14%, supported by strength in the dairy and livestock sector and a modest recovery in turf.
Construction and Forestry Industry: Industry sales for earthmoving and compact construction equipment in the U.S. and Canada are expected to be flat to up 5% in fiscal year 2026. Modest growth is anticipated, supported by robust construction backlogs, government infrastructure spending, and declining interest rates. Global forestry and roadbuilding markets are expected to remain flat.
Construction and Forestry Segment: Net sales are forecasted to grow by approximately 10% in fiscal year 2026. Operating margins are projected to be between 8% and 10%, with benefits from higher North American earthmoving volumes and price realization tempered by incremental tariff expenses.
Financial Services: Net income is forecasted to be $830 million in fiscal year 2026, lower year-over-year due to reduced portfolio levels, partially offset by favorable financing spreads.
Overall Net Income: Net income for fiscal year 2026 is expected to range between $4 billion and $4.75 billion. This includes projected pretax direct tariff expenses of approximately $1.2 billion and an effective tax rate between 25% and 27%. Operating cash flow from equipment operations is projected to be between $4 billion and $5 billion.
Dividends: We paused buybacks in the fourth quarter due to heightened market uncertainty, but we expect to resume our normal capital allocation activities in 2026.
Share Repurchase: We paused buybacks in the fourth quarter due to heightened market uncertainty, but we expect to resume our normal capital allocation activities in 2026.
The earnings call presents a mixed picture: strong Q4 financial performance contrasts with a year-over-year decline in FY 2025 sales. Positive elements include resumed share repurchases in 2026 and optimistic guidance on margin improvements. However, the overall sentiment is tempered by high tariffs, unfavorable geographic mix, and unclear management responses in the Q&A. Given the lack of a market cap and the mixed signals, the stock price reaction is likely to be neutral, with potential for slight volatility due to uncertainties and external factors.
The earnings call presents a mixed outlook. While financial services net income is up, concerns about production alignment with demand, cautious ordering, and pricing competition in CNF create uncertainties. Positive pricing and AI investments are promising, but wide cash flow guidance and tariff impacts raise caution. The Q&A reveals optimism about international growth and AI potential but also highlights market uncertainties. With no strong catalysts like new partnerships or record revenue, and given the mixed guidance, the stock price is likely to remain stable over the next two weeks.
The earnings call reveals several negative factors: declining net sales across segments, pressures from high interest rates, and competitive pricing issues. Despite EPS growth, the company's guidance is cautious due to economic uncertainties and a challenging macro environment. The Q&A section highlights concerns about tariffs, margin protection, and unclear management responses, further dampening sentiment. While shareholder returns are emphasized, the overall negative financial performance and market challenges suggest a likely negative stock price reaction in the short term.
The earnings call reveals declining financial performance with significant year-over-year drops in net sales and revenue across key segments, pressured by economic and competitive factors, including tariffs and high interest rates. Although management is committed to shareholder returns, uncertainties about tariff impacts and vague responses in the Q&A section contribute to a negative sentiment. Despite some positive elements like new product launches and acquisition plans, the overall outlook is clouded by market challenges, leading to a likely negative stock price reaction over the next two weeks.
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