8-K: Deere Q3 Net Income Plunges 26%, Narrows FY25 Outlook

Deere & Company reported a significant decline in third-quarter net income and revenues, narrowing its full-year net income guidance amidst a challenging market and cautious customer sentiment.

Summary

• Net income for the third quarter of fiscal 2025 was $1.289 billion, or $4.75 per share, a 26% decrease compared to $1.734 billion, or $6.29 per share, in the third quarter of fiscal 2024.
• Worldwide net sales and revenues for the third quarter of 2025 decreased 9% to $12.018 billion, down from $13.152 billion in the prior year.
• For the first nine months of fiscal 2025, net income was $3.962 billion, or $14.57 per share, a 32% decrease from $5.855 billion, or $21.04 per share, for the same period last year.
• Year-to-date net sales and revenues decreased 18% to $33.290 billion, down from $40.572 billion in the prior year.
• Fiscal 2025 net income attributable to Deere & Company is now forecasted to be in a narrowed range of $4.75 billion to $5.25 billion.
• Production & Precision Agriculture net sales decreased 16%, with operating profit down 50% due to lower shipment volumes and unfavorable price realization.
• Small Agriculture & Turf net sales decreased 1%, with operating profit down 2% due to lower shipment volumes, partially offset by favorable currency translation and price realization.
• Construction & Forestry net sales decreased 5%, with operating profit down 47% primarily due to unfavorable price realization and higher production costs from tariffs.
• Financial Services net income increased 34% to $205 million for the quarter, driven by a lower provision for credit losses and prior year special items.

Sentiment

Score: 3

Explanation: The company reported significant declines in net income and revenues across most segments, and narrowed its full-year guidance, reflecting a challenging market. While management highlights proactive inventory management and technology adoption, the overall financial performance is weak.

Positives

• Financial Services net income increased 34% for the quarter, primarily due to a lower provision for credit losses.
• Proactive inventory management has matched production to retail demand, enabling swift responses to market shifts and customer needs.
• Efforts to address high levels of used equipment are building a healthier market for customers, dealers, and the business.
• Increasing utilization and proven in-field effectiveness of advanced technologies like See & Spray and Harvest Settings Automation are empowering customers to improve productivity.
• Small Agriculture & Turf segment benefited from reductions in warranty expenses and lower production costs, mainly due to lower material costs.

Negatives

• Net income for the third quarter of 2025 decreased by 26% year-over-year.
• Worldwide net sales and revenues decreased by 9% in the third quarter and 18% for the first nine months of fiscal 2025.
• Full-year net income guidance has been narrowed, reflecting a more cautious outlook.
• Production & Precision Agriculture operating profit decreased significantly by 50% due to lower shipment volumes and unfavorable price realization.
• Construction & Forestry operating profit decreased substantially by 47% due to unfavorable price realization and higher production costs from tariffs.
• Customers remain cautious amid ongoing uncertainty in the market.
• Higher tariffs negatively impacted operating profit in both Small Agriculture & Turf and Construction & Forestry segments.

Risks

• Government policies and actions regarding the global trade environment, including increased and proposed tariffs and retaliatory trade regulations.
• Uncertainty in the company's ability to sell products domestically or internationally, continue production at certain international facilities, procure raw materials and components, accurately forecast demand and inventory, manage increased costs of production, absorb or pass on increased pricing, accurately predict financial results and industry trends, and remain competitive based on trade actions, policies, and general economic uncertainty.
• The unpredictable agricultural business cycle, affected by factors such as world grain stocks, harvest yields, available farm acres, acreage planted, soil conditions, prices for commodities and livestock, input costs, availability of transport for crops, and adverse macroeconomic conditions including unemployment, inflation, interest rate volatility, changes in consumer practices due to slower economic growth or a recession, and regional or global liquidity constraints.
• Higher interest rates and currency fluctuations that could adversely affect the U.S. dollar, customer confidence, access to capital, and demand for the company's products and solutions.
• The company's ability to adapt in highly competitive markets, including understanding and meeting customers' changing expectations for products and solutions, including delivery and utilization of precision technology.
• Housing starts and supply, real estate and housing prices, levels of public and non-residential construction, and infrastructure investment.
• Political, economic, and social instability of the geographies in which the company operates, including the ongoing war between Russia and Ukraine and the conflicts in the Middle East.
• Worldwide demand for food and different forms of renewable energy impacting the price of farm commodities and consequently the demand for the company's equipment.
• Investigations, claims, lawsuits, or other legal proceedings, including the lawsuit filed by the Federal Trade Commission (FTC) and the Attorneys General of the States of Arizona, Illinois, Michigan, Minnesota, and Wisconsin alleging that the company unlawfully withheld self-repair capabilities from farmers and independent repair providers.
• Delays or disruptions in the company's supply chain.
• Changes in climate patterns, unfavorable weather events, and natural disasters.
• Availability and price of raw materials, components, and whole goods.
• Suppliers' and manufacturers' business practices and compliance with applicable laws such as human rights, safety, environmental, and fair wages.
• Loss of or challenges to intellectual property rights.
• Rationalization, restructuring, relocation, expansion and/or reconfiguration of manufacturing and warehouse facilities.
• The ability to execute business strategies, including the company's Smart Industrial Operating Model and Leap Ambitions.
• Accurately forecasting customer demand for products and services and adequately managing inventory.
• Dealer practices and their ability to manage new and used inventory, distribute the company's products, and to provide support and service for precision technology solutions.
• The ability to realize anticipated benefits of acquisitions and joint ventures, including challenges with successfully integrating operations and internal control processes.
• Negative claims or publicity that damage the company's reputation or brand.
• The ability to attract, develop, engage, and retain qualified employees.
• The impact of workforce reductions on company culture, employee retention and morale, and institutional knowledge.
• Labor relations and contracts, including work stoppages and other disruptions.
• Security breaches, cybersecurity attacks, technology failures, and other disruptions to the company's information technology infrastructure and products.
• Leveraging artificial intelligence and machine learning within the company's business processes.
• Changes to governmental communications channels (radio frequency technology).
• Changes to existing laws and regulations, including the implementation of new, more stringent laws, as well as compliance with a variety of U.S., foreign and international laws, regulations, and policies relating to, but not limited to: advertising, anti-bribery and anti-corruption, anti-money laundering, antitrust, consumer finance, cybersecurity, data privacy, encryption, environmental (including climate change and engine emissions), farming, health and safety, foreign exchange controls and cash repatriation restrictions, foreign ownership and investment, human rights, import / export and trade, tariffs, labor and employment, product liability, tax, telematics, and telecommunications.
• Governmental and other actions designed to address climate change in connection with a transition to a lower-carbon economy.
• Warranty claims, post-sales repairs or recalls, product liability litigation, and regulatory investigations because of the deficient operation of the company's products.

Future Outlook

Fiscal 2025 net income is forecasted to be in a narrowed range of $4.75 billion to $5.25 billion. Net operating cash flow for equipment operations is projected between $4.5 billion and $5.5 billion, with an effective tax rate of 19-21% and capital expenditures around $1.4 billion. Industry outlooks for fiscal 2025 anticipate significant declines in U.S. & Canada Large Ag (~30% down) and Construction Equipment (~10% down), while other segments are expected to be flat to slightly down or up.

Management Comments

• "By proactively managing inventory, we've matched production to retail demand, enabling our company and dealers to respond swiftly to market shifts and customer needs."
• "By continuing to address the high levels of used equipment in the industry, we're building a healthier market for everyone—our customers, our dealers, and our business—even in these challenging times."
• "We remain committed to delivering solutions that address our customers' current needs while also laying the groundwork for future growth."
• "The positive outcomes we're enabling reinforce our confidence in Deere's future despite near-term uncertainty."

Industry Context

The company operates in a challenging market environment characterized by ongoing uncertainty and cautious customer sentiment. Key industry segments, particularly large agriculture and construction equipment in the U.S. and Canada, are experiencing significant downturns. The company is actively managing its inventory levels and addressing the prevalence of used equipment to stabilize market conditions and adapt to these shifts.

Comparison to Industry Standards

• U.S. and Canada Ag Industry 2WD Tractors (< 40 PTO hp) retail sales were up 5%, and Deere's performance was in line with the industry.
• U.S. and Canada Ag Industry 2WD Tractors (40 < 100 PTO hp) retail sales were up 2%, and Deere's performance was more than the industry.
• U.S. and Canada Ag Industry 2WD Tractors (100+ PTO hp) retail sales were down 28%, and Deere's performance was more than the industry.
• U.S. and Canada Ag Industry 4WD Tractors retail sales were down 42%, and Deere's performance was less than the industry.
• U.S. and Canada Ag Industry Combines retail sales were down 28%, and Deere's performance was more than the industry.
• Europe Ag Tractors retail sales were down double digits, and Deere's performance was also down double digits.
• Europe Ag Combines retail sales were down single digits, and Deere's performance was also down single digits.
• U.S. and Canada Selected Turf and Utility Equipment retail sales were flat, and Deere's performance was flat.
• Earthmoving and Forestry retail sales were down single digits, and Deere's performance was down single digits.

Legal Proceedings

• A lawsuit was filed by the Federal Trade Commission (FTC) and the Attorneys General of the States of Arizona, Illinois, Michigan, Minnesota, and Wisconsin, alleging that the company unlawfully withheld self-repair capabilities from farmers and independent repair providers.

Related Party Transactions

• The company entered into an agreement with Banco Bradesco S.A. for Bradesco to invest and become a 50% owner of Banco John Deere S.A. (BJD), leading to the deconsolidation of BJD in February 2025. The company now accounts for its investment in BJD using the equity method.

Stakeholder Impact

• Shareholders: Experienced a significant decrease in net income and diluted EPS, and the narrowed full-year guidance may negatively impact stock price. Dividends declared increased from $1.47 to $1.62 per share.
• Customers: Are cautious amid ongoing uncertainty but are benefiting from the company's proactive inventory management and the increasing utilization of advanced technologies like See & Spray and Harvest Settings Automation, which aim to improve productivity.
• Dealers: Are impacted by market shifts and high levels of used equipment, but the company's efforts in inventory management are intended to support a healthier market.
• Employees: Employee-separation programs were implemented in Q3 2024 for salaried workforce in several geographic areas to reduce overlap and redundancy, indicating potential workforce reductions and their impact on morale and institutional knowledge.

Next Steps

• The company's fourth quarter fiscal 2025 earnings call is scheduled for Wednesday, November 26, 2025, at 9:00 a.m. Central Time.

Key Dates

Recommendation

The significant year-over-year declines in net income (26% in Q3, 32% YTD) and revenues (9% in Q3, 18% YTD), coupled with a narrowed full-year guidance, indicate a deteriorating financial performance in a challenging market. Key segments like Production & Precision Agriculture and Construction & Forestry show substantial drops in operating profit. While the company is managing inventory and investing in technology, the immediate outlook is negative, and the broad range of identified risks, including trade policies, interest rates, and ongoing legal proceedings, suggest continued headwinds. The current financial results do not support a positive investment thesis.

Keywords

Agriculture, Construction, Forestry, Heavy Equipment, Farm Machinery, Financial Services, Precision Agriculture, John Deere, Earnings, Quarterly Report, SEC Filing, Manufacturing, Industrial, Capital Goods