8-K: Deere Reports Q4 Profit Decline, Forecasts Lower 2026 Earnings

Deere & Company announced a 14% drop in fourth-quarter net income and a 29% decrease for the full fiscal year 2025, projecting further declines for fiscal year 2026.

Summary

• Deere & Company reported net income of $1.065 billion for the fourth quarter of fiscal 2025, a 14% decrease from $1.245 billion in Q4 2024.
• Diluted earnings per share (EPS) for Q4 2025 were $3.93, down 14% from $4.55 in Q4 2024.
• For the full fiscal year 2025, net income attributable to Deere & Company was $5.027 billion, a 29% decrease from $7.100 billion in fiscal 2024.
• Full-year diluted EPS for 2025 was $18.50, down 28% from $25.62 in 2024.
• Worldwide net sales and revenues increased 11% to $12.394 billion for Q4 2025, but decreased 12% to $45.684 billion for the full fiscal year.
• Net sales for equipment operations were $10.579 billion for Q4 2025, up from $9.275 billion in Q4 2024, but full-year net sales were $38.917 billion, down from $44.759 billion in 2024.
• The company forecasts net income for fiscal year 2026 to be in a range of $4.00 billion to $4.75 billion, indicating a further decline from 2025.
• Production & Precision Agriculture (PPA) net sales increased 10% in Q4, but operating profit decreased 8% due to higher production costs, tariffs, and special items.
• Small Agriculture & Turf (SAT) net sales increased 7% in Q4, but operating profit plummeted 89% due to higher tariffs, warranty expenses, and production costs.
• Construction & Forestry (CF) net sales increased 27% in Q4, with operating profit up 6% primarily due to higher shipment volumes.
• Financial Services net income increased 69% in Q4 due to favorable financing spreads, special items, and a lower provision for credit losses.

Sentiment

Score: 3

Explanation: The sentiment is negative due to significant declines in full-year net income and EPS, a lower net income forecast for the upcoming fiscal year, and persistent challenges in the large agriculture sector. While some segments show growth and management highlights resilience, the overall financial performance and outlook are clearly weaker.

Positives

• Worldwide net sales and revenues increased 11% in the fourth quarter of 2025 to $12.394 billion.
• Construction & Forestry segment sales increased 27% in Q4 2025, driven by higher shipment volumes.
• Financial Services net income for Q4 2025 was significantly higher, up 69% to $293 million, due to favorable financing spreads and a lower provision for credit losses.
• The company achieved its 'best results yet for this point in the cycle' due to structural improvements and diverse customer segments and geographies.
• Outlook for small agriculture & turf and construction & forestry segments improves, with expected growth in 2026.
• The company is committed to inventory management and cost control to effectively manage the business.

Negatives

• Net income for Q4 2025 decreased 14% to $1.065 billion compared to Q4 2024.
• Diluted EPS for Q4 2025 decreased 14% to $3.93 compared to Q4 2024.
• Full fiscal year 2025 net income decreased 29% to $5.027 billion compared to fiscal year 2024.
• Full fiscal year 2025 diluted EPS decreased 28% to $18.50 compared to fiscal year 2024.
• Worldwide net sales and revenues decreased 12% for the full fiscal year 2025.
• Production & Precision Agriculture operating profit decreased 8% in Q4 2025, primarily due to higher production costs, tariffs, and special items.
• Small Agriculture & Turf operating profit decreased 89% in Q4 2025, mainly due to higher tariffs, warranty expenses, and production costs.
• The company forecasts a lower net income range of $4.00 billion to $4.75 billion for fiscal year 2026, indicating a continued downturn.
• The large agriculture sector is expected to remain subdued, with U.S. & Canada Large Ag sales projected to be down 15-20% in FY 2026.
• Ongoing margin pressures from tariffs and persistent challenges in the large ag sector remain.

Risks

• The agricultural business cycle is unpredictable and affected by factors such as farm income, international trade, world grain stocks, crop yields, commodity prices, input costs, and governmental farm programs.
• Adverse macroeconomic conditions, including unemployment, inflation, interest rate volatility, changes in consumer practices due to slower economic growth or recession, and regional or global liquidity constraints.
• Uncertainty of government policies and actions regarding the global trade environment, including increased and proposed tariffs and retaliatory trade regulations.
• Political, economic, and social instability in operating geographies, including the ongoing war between Russia and Ukraine and conflicts in the Middle East.
• Worldwide demand for food and different forms of renewable energy impacting farm commodity prices and equipment demand.
• Accurately forecasting customer demand for products and services and adequately managing inventory.
• Availability and price of raw materials, components, and whole goods.
• Delays or disruptions in the company's supply chain.
• Changes in climate patterns, unfavorable weather events, and natural disasters.
• Higher interest rates and currency fluctuations which could adversely affect the U.S. dollar, customer confidence, access to capital, and demand for products.
• Ability to adapt in highly competitive markets and meet changing customer expectations for precision technology.
• The ability to execute business strategies, including the Smart Industrial Operating Model and Leap Ambitions.
• Dealer practices and their ability to manage inventory, distribute products, and provide support for precision technology solutions.
• Negative claims or publicity that damage the company's reputation or brand.
• The ability to attract, develop, engage, and retain qualified employees, and the impact of workforce reductions on company culture and morale.
• Labor relations and contracts, including work stoppages and other disruptions.
• Security breaches, cybersecurity attacks, technology failures, and other disruptions to information technology infrastructure and products.
• Leveraging artificial intelligence and machine learning within business processes.
• Changes to existing laws and regulations, including new, more stringent laws and compliance with various U.S., foreign, and international laws (e.g., anti-bribery, antitrust, data privacy, environmental, tariffs, product liability).
• 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 due to deficient product operation.
• Investigations, claims, lawsuits, or other legal proceedings, including the lawsuit filed by the Federal Trade Commission (FTC) and several State Attorneys General alleging unlawful withholding of self-repair capabilities from farmers.
• Loss of or challenges to intellectual property rights.

Future Outlook

Deere & Company projects fiscal year 2026 net income to be between $4.00 billion and $4.75 billion, anticipating that 2026 will mark the bottom of the large agriculture cycle. While large ag is expected to decline by 15-20% in the U.S. & Canada, small agriculture & turf and construction & forestry segments are forecasted to see growth of flat to up 5% and up ~10% respectively. Financial Services net income is projected to be around $830 million. The company expects to manage ongoing margin pressures from tariffs and large ag challenges through inventory management and cost control.

Management Comments

• "This past year brought its share of challenges and uncertainty, but thanks to the structural improvements weve made and the diverse customer segments and geographies we serve, we were able to achieve our best results yet for this point in the cycle."
• "Our continued commitment to delivering customer value and focusing on operational efficiency enabled us to remain resilient and demonstrate the strength of our business."
• "Looking ahead, we believe 2026 will mark the bottom of the large ag cycle."
• "While ongoing margin pressures from tariffs and persistent challenges in the large ag sector remain, our commitment to inventory management and cost control, coupled with expected growth in small agriculture & turf and construction & forestry, positions us to effectively manage the business and seize emerging opportunities as market conditions begin to recover."

Industry Context

The filing indicates a challenging period for the large agriculture sector, with a projected decline of 15-20% in U.S. & Canada Large Ag for FY 2026, suggesting a broader industry downturn in this segment. However, the outlook for small agriculture & turf and construction & forestry is more positive, with expected growth, aligning with potential shifts in demand or market resilience in these areas. The mention of tariffs and production costs suggests ongoing global trade and supply chain pressures affecting the heavy equipment industry.

Comparison to Industry Standards

• U.S. and Canada Ag Industry retail sales for 2WD Tractors (< 40 PTO hp) were 10% less than Deere's performance over the rolling 3 months ending October 2025.
• U.S. and Canada Ag Industry retail sales for 2WD Tractors (40 < 100 PTO hp) were in-line with Deere's performance over the rolling 3 months ending October 2025.
• U.S. and Canada Ag Industry retail sales for 2WD Tractors (100+ PTO hp) were 17% more than Deere's performance over the rolling 3 months ending October 2025.
• U.S. and Canada Ag Industry retail sales for 4WD Tractors were in-line with Deere's performance over the rolling 3 months ending October 2025.
• U.S. and Canada Ag Industry retail sales for Combines were 20% more than Deere's performance over the rolling 3 months ending October 2025.
• Deere's dealer inventories for 2WD Tractors (100+ PTO hp) in U.S. and Canada Ag were 23% in 2025, compared to 24% in 2024 (as a % of trailing 12 months retail sales).
• Deere's dealer inventories for Combines in U.S. and Canada Ag were 8% in 2025, compared to 4% in 2024 (as a % of trailing 12 months retail sales).

Legal Proceedings

• The company increased accrued losses by $95 million pretax ($75 million after-tax) in Q4 2025 related to a consolidated multidistrict class action antitrust lawsuit.
• The company is involved in a lawsuit filed by the Federal Trade Commission (FTC) and Attorneys General of several states alleging unlawful withholding of self-repair capabilities from farmers and independent repair providers.

Related Party Transactions

• In 2024, the company entered an agreement with Banco Bradesco S.A. for Bradesco to invest and become a 50% owner of Banco John Deere S.A. (BJD), a wholly-owned subsidiary in Brazil. The company deconsolidated BJD in February 2025 and now accounts for its investment using the equity method.

Stakeholder Impact

• Shareholders will experience lower earnings per share and a reduced net income forecast for the upcoming fiscal year, potentially impacting stock valuation.
• Employees may face continued workforce adjustments, as employee-separation programs were implemented in 2024 and workforce reductions are listed as a risk factor.
• Customers in the large agriculture sector may face continued market challenges, while those in small agriculture & turf and construction & forestry could see new product offerings and support as these segments are targeted for growth.
• Customers may be impacted by the ongoing FTC lawsuit regarding self-repair capabilities, which could influence product service and repair options.
• Suppliers may experience continued pressure from the company's focus on cost control and potential supply chain disruptions.
• Creditors will note the company's commitment to managing its balance sheet to maintain a strong credit rating for access to low-cost funding.

Next Steps

• The company will continue its commitment to inventory management and cost control.
• The company will focus on seizing emerging opportunities as market conditions begin to recover, particularly in small agriculture & turf and construction & forestry.
• The next earnings call for Q1 2026 is scheduled for Thursday, February 19, 2026.

Key Dates

Recommendation

Deere & Company's full fiscal year 2025 results show a significant decline in net income and EPS, and the outlook for fiscal year 2026 projects further contraction, particularly in the large agriculture segment. While the company highlights resilience, structural improvements, and growth in smaller segments (small ag & turf, construction & forestry), the overall financial trajectory is negative. The stock may be at or near the 'bottom of the large ag cycle' as management suggests, which could imply limited further downside from current levels if the market believes in a recovery post-2026. However, the immediate future presents headwinds from tariffs, production costs, and a shrinking core market. A 'hold' recommendation is appropriate for investors who believe in the long-term recovery of the agriculture cycle and the company's ability to navigate current challenges, but it does not warrant a 'buy' given the declining earnings and outlook. Existing investors should monitor the large ag cycle's bottoming and the performance of the growth segments.

Keywords

Deere & Company, DE, Earnings Report, Q4 2025, Fiscal Year 2025, Financial Results, Net Income, EPS, Sales, Agriculture Equipment, Construction Equipment, Forestry Equipment, Financial Services, Outlook 2026, Large Ag Cycle, Tariffs, Operating Profit, SEC Filing, 8-K