Deere & Company DE used its third-quarter fiscal 2026 earnings call to reinforce its view that the agricultural equipment cycle is bottoming while construction demand remains firm. Management also raised its full-year profit and cash flow outlook.
The message was cautious improvement rather than a sharp rebound. Early-order trends, healthier inventories and technology adoption support the 2027 setup, but farm economics remain pressured.
DE Raises Profit and Cash Flow Outlook
Brent Norwood, chief financial officer and senior vice president, said strong execution and a fourth-quarter order book supported the company's fiscal 2026 net income forecast of $4.75 billion to $5.00 billion. Equipment-operations cash flow guidance rose to $5.0 billion to $5.5 billion.
Third-quarter earnings of $5.10 per share topped the Zacks Consensus Estimate of $4.79. Equipment-operations net sales were $10.999 billion, above the $10.8 billion Zacks Consensus Estimate.
Christopher Seibert, director of investor relations, said factories exceeded production expectations, while cost discipline and favorable pricing supported profitability. Equipment operations posted a 14.4% operating margin.
Deere Calls 2026 the Ag-Cycle Bottom
Deanna Kovar, president of Worldwide Ag & Turf, Production and Precision Ag, and Americas and Australia, said North American early-order programs are improving modestly. Combined planter and sprayer orders were up mid-single digits versus last year's completed programs.
Kovar said replacement demand is strengthening as fleet age rises, while used-equipment inventories and new-versus-used value spreads have improved. She still described the expected 2027 recovery as measured because farm economics remain pressured.
Responding to a Truist Securities analyst, Kovar said 2027 early-order pricing is focused on covering inflation. Norwood said management continues to view 2026 as the bottom of the ag equipment cycle.
DE Trims PPA as Brazil and Europe Soften
Seibert said fiscal 2026 Production & Precision Ag sales are now expected to decline about 10%, with an operating margin of 11-12%. The revision reflects softer conditions in South America and Europe.
Kovar said South American customers face elevated fertilizer costs and high interest rates, while European arable farmers remain pressured by input costs and crop uncertainty. Deere expects South American industry sales to fall 15-20%, while Europe is seen roughly flat.
In North America, Kovar said demand has remained stable but at low levels. Separately, Seibert said PPA is modestly underproducing retail demand as Deere manages inventories.
Deere's C&F Backlog Extends Into 2027
Seibert said Construction & Forestry demand remains supported by infrastructure, data center and energy projects. Deere maintained its fiscal 2026 segment sales growth forecast at about 20% and narrowed operating-margin guidance to 10.5-11.5%.
He said C&F order books extend four to five months, above Deere's typical two-to-three-month range. Retail demand is running ahead of production, leaving inventories healthy.
Norwood said construction also offers room for technology adoption. Deere reported factory-installed SmartGrade adoption up more than 50% year to date and job-site safety solution sales up nearly 40%.
DE Flags a Tariff Headwind Into 2027
Seibert said Deere now expects about $1.1 billion of direct fiscal 2026 tariff expense, excluding refunds, down from $1.2 billion after Section 232 changes. Refunds recognized through the third quarter totaled $382 million, with no more assumed.
Responding to a UBS analyst, Norwood said net tariff exposure should be about $750 million this year versus a run rate near $1 billion in fiscal 2027. That makes tariffs a year-over-year headwind.
Norwood also said fourth-quarter margins will not repeat the third quarter's refund benefit. PPA and Small Ag & Turf face their usual seasonal increase in R&D and selling, administrative and general expenses.
Deere Keeps Recovery Expectations Measured
Management's fiscal 2027 posture combines confidence in channel health and technology demand with caution on farm economics. Kovar said customers remain focused on lowering costs and lifting yields, while Seibert said pricing is intended to cover inflation over time.
Norwood's closing message centered on healthy inventories, continued investment and stronger contributions from Construction & Forestry and Small Ag & Turf as agriculture works through the trough.
DE's Zacks Signals Remain Cautious
DE carries a Zacks Rank #3 (Hold). Under the Zacks framework, a Hold can remain in a portfolio, but the strongest combinations pair Zacks Rank #1 (Strong Buy) or 2(Buy) stocks with Style Scores of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.
DE's Value and Growth Scores are D, while its Momentum and VGM Score are F. Those weaker grades offer limited support across the style factors, and the Zacks Rank can change as analysts revise earnings estimates after the reported results.
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Deere & Company (DE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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