10-Q: Deere & Co. Reports Strong Q3 2026 Results

Deere & Company announced a 5% increase in net sales and revenues for the third quarter of 2026, driven by higher volumes and favorable price realization across its segments.

Summary

• Deere & Company reported a 5% increase in net sales and revenues for the third quarter of fiscal year 2026, reaching $12,608 million, compared to $12,018 million in the same period last year.
• Net income attributable to Deere & Company for the quarter was $1,379 million, a 7% increase from $1,289 million in the prior year's third quarter.
• Diluted earnings per share rose to $5.10 from $4.75 in the prior year's third quarter.
• For the first nine months of fiscal year 2026, net sales and revenues increased by 7% to $35,589 million, while net income attributable to Deere & Company decreased by 4% to $3,808 million.
• The Production & Precision Agriculture segment experienced a 6% decrease in net sales but a 9% decrease in operating profit, attributed to lower shipment volumes and higher production costs.
• The Small Agriculture & Turf segment saw a 12% increase in net sales and a 28% increase in operating profit, driven by higher shipment volumes and favorable price realization.
• The Construction & Forestry segment reported an 18% increase in net sales and an 84% increase in operating profit, benefiting from higher shipment volumes and price realization.
• Financial Services revenue decreased by 3%, but net income increased by 7% due to favorable financing spreads.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a generally positive report, with solid revenue growth and increased operating profit in key segments, despite some headwinds in Production & Precision Agriculture and higher tax provisions.

Positives

• Net sales and revenues increased by 5% to $12,608 million in Q3 2026.
• Net income attributable to Deere & Company increased by 7% to $1,379 million in Q3 2026.
• Diluted earnings per share increased to $5.10 in Q3 2026.
• Small Agriculture & Turf segment net sales increased by 12% and operating profit by 28%.
• Construction & Forestry segment net sales increased by 18% and operating profit by 84%.
• Financial Services net income increased by 7% due to favorable financing spreads.
• The company expects overall net sales to increase in fiscal year 2026 compared to 2025.
• Favorable price realization contributed positively to segment results.

Negatives

• Production & Precision Agriculture segment net sales decreased by 6% and operating profit by 9% due to lower shipment volumes and higher production costs.
• Net income for the first nine months of fiscal year 2026 decreased by 4% to $3,808 million.
• Higher material costs and unfavorable tax impacts affected quarterly results.
• The company faces potential headwinds in the large agriculture market due to elevated input costs and market uncertainty.
• Tariffs, though partially recovered, continued to impact costs.

Risks

• The agricultural market is subject to business cycles influenced by commodity prices, acreage planted, crop yields, government policies, and macroeconomic trends, potentially leading to lower sales volumes, higher sales incentives, and elevated receivable write-offs in 2026.
• Global trade policies, including tariffs and retaliatory measures, continue to create uncertainty and impact product costs.
• Slower economic growth, inflation, interest rate volatility, and geopolitical conflicts could affect demand and liquidity.
• Changes in climate patterns, unfavorable weather events, and natural disasters pose risks to operations.
• Supply chain disruptions and volatility in commodity prices, including fertilizers, present ongoing challenges.
• Right-to-repair and agriculture data privacy regulations could impact business operations.
• Higher interest rates and currency fluctuations may adversely affect customer confidence and demand.
• The pace of adoption and monetization of new technologies, including AI and autonomy, could impact future revenue streams.

Future Outlook

Overall net sales are expected to increase in fiscal year 2026 compared to 2025, with anticipated declines in PPA sales being more than offset by improvements in CF and SAT. Large agriculture equipment demand is expected to decrease in North America and soften in South America. Small agriculture and turf equipment sales are expected to be flat to slightly up in the U.S. and Canada. Construction and forestry equipment sales in the U.S. and Canada are projected to be higher, while global forestry markets are expected to decrease. Global roadbuilding markets are forecasted to increase.

Management Comments

• "Our Leap Ambitions, a set of focused goals designed to guide the implementation of our Smart Industrial Operating Model, feature multi-year financial and operational goals, emphasizing the use of our differentiated equipment and service solutions, including automation, autonomy, digitalization, lifecycle solutions, and Solutions as a Service (SaaS)."
• "Customers seek to improve profitability, productivity, and sustainability by selecting our equipment and technology solutions."
• "In 2026, we may experience the following effects due to unfavorable large agriculture market conditions: lower sales volumes, higher sales incentives, and elevated receivable write-offs."
• "We continue to pursue opportunities to mitigate impacts on our business, to the extent possible, including adjusting sourcing strategies, seeking product exemptions, and identifying cost reduction opportunities."

Industry Context

StockSavvy.ai notes that Deere's performance reflects broader industry trends, with strong demand in Construction & Forestry driven by infrastructure projects, while the large agriculture segment faces headwinds from input costs and market uncertainty. The company's strategic focus on technology and 'Solutions as a Service' aligns with industry-wide digitalization efforts.

Comparison to Industry Standards

• The Construction & Forestry segment's operating margin of 12.1% in Q3 2026 is a significant improvement from 7.7% in the prior year, indicating strong execution in a growing market segment.
• The Small Agriculture & Turf segment's operating margin of 18.4% in Q3 2026 demonstrates robust profitability, outperforming the Construction & Forestry segment.
• The Production & Precision Agriculture segment's operating margin declined to 11.8% from 16.4%, suggesting challenges in managing costs and volumes in this core segment compared to its historical performance.
• Financial Services' net income growth of 7% with a lower average portfolio suggests improved efficiency and favorable financing spreads, potentially outperforming other financial services arms in the equipment sector.

Legal Proceedings

• A lawsuit filed by the FTC and several state Attorneys General was settled on July 8, 2026. As part of the settlement, Deere agreed to provide repair resources to farmers and independent repair providers on fair and reasonable terms and to report to the FTC on compliance.
• The company is involved in other legal actions, primarily related to product liability (including asbestos), employment, patent, trademark, and antitrust matters. While current estimates suggest no material impact, adverse outcomes could be costly.

Related Party Transactions

• Deere & Company has a 50% ownership interest in Banco John Deere S.A. (BJD), an equity method investment that finances retail and wholesale loans. BJD is a variable interest entity (VIE), but Deere is not the primary beneficiary as power is shared.
• Intersegment transactions, primarily between the Financial Services segment and equipment segments, are recognized at current market prices.

Stakeholder Impact

• Shareholders: Increased net income and EPS in Q3 2026, along with a declared quarterly dividend of $1.62 per share, are positive for shareholders. Share repurchases continue.
• Employees: Continued investment in R&D and technology solutions may lead to new opportunities. However, potential workforce reductions are mentioned as a risk.
• Customers: The company aims to improve customer profitability and productivity through technology. The FTC settlement may impact repair services for farmers.
• Suppliers: Ongoing tariff impacts and supply chain disruptions could affect suppliers. Deere is working to mitigate these impacts.
• Creditors: The company's strong credit ratings (A+, A1, A) and access to credit lines provide financial stability.

Next Steps

• Continue to implement the Smart Industrial Operating Model and Leap Ambitions.
• Focus on integrating technology into equipment to enhance customer profitability, productivity, and sustainability.
• Mitigate impacts of global trade policies and agricultural market conditions through sourcing strategies and cost reduction.
• Monitor and adapt to evolving regulations, including right-to-repair and data privacy.
• Manage inventory levels and supply chain disruptions effectively.
• Pursue opportunities to strengthen digital capabilities, artificial intelligence, automation, and autonomy.

Key Dates

Recommendation

The report shows solid revenue growth and improved profitability in key segments, particularly Construction & Forestry and Small Agriculture & Turf. However, the decline in Production & Precision Agriculture and the overall decrease in net income for the nine-month period, coupled with ongoing risks related to market conditions, tariffs, and economic uncertainty, suggest a cautious outlook. While the company's strategic focus on technology is positive, the current environment warrants a 'hold' recommendation pending clearer signs of sustained profit growth across all segments and resolution of macroeconomic headwinds.

Keywords

agriculture equipment, construction equipment, forestry equipment, financial services, farm machinery, heavy equipment, precision agriculture, turf equipment