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Deere posts higher profit in the third quarter

Deere increased its net profit by 7% year on year to $1.379 billion in the third quarter of fiscal 2026. Diluted earnings per share rose from $4.75 to $5.10, while overall results remained strong despite weaker sales in the company’s largest business line.

At its earnings call on Aug. 20, the company raised its full-year net profit forecast to a range of $4.75 billion to $5.00 billion. The key support came not from row-crop tractors but from roadbuilding and lawn-and-garden equipment.

Construction and small ag segments drove growth

Infrastructure and data center spending supported orders

In the Construction and Forestry division, net sales rose 18% to $3.618 billion. The operating margin improved to 12.1% from 7.7% a year earlier, with management saying large infrastructure projects, data center construction and a strong contractor backlog are extending the order book into fiscal 2027.

The company lifted its 2026 growth outlook for earthmoving equipment in the U.S. and Canada to 5%-10%. Global growth in roadbuilding equipment is also expected to come in at about 10% for the year.

Margins improved in small ag and turf equipment

Small Ag and Turf sales rose 12% to $3.383 billion. The operating margin climbed to 18.4% from 16% thanks to a better product mix and pricing, while strong beef prices and healthy dairy producer margins supported demand.

Channel conditions also improved. Inventory of 2023 and 2024 high-horsepower used tractors fell by about 40% year on year, and the company said the gap between new and used equipment values has largely normalized.

  • Factory-installed SmartGrade usage has increased by more than 50% so far this year.
  • See & Spray shipments are expected to nearly double, and about one-third of sprayers on order in North America include the system.
  • John Deere Operations Center is monitoring 520 million acres across 1.2 million connected machines and has 450,000 monthly active users.
  • The company received $382 million in tariff refunds in this fiscal year, including $110 million recorded in the third quarter.

Weakness in large farm equipment and cost pressure persist

Lower sales in South America and Europe weighed on results

In the Production and Precision Agriculture segment, net sales fell 6% to $3.998 billion. The operating margin also slipped to 13.2% from 13.6%, hit by lower shipment volumes in South America and Europe.

The company expects full-year sales in this segment to fall by about 10%. For South America, the industry outlook was cut to a decline of 15%-20% for the full year, while in Europe, high input costs and uncertainty tied to hot, dry weather continued to limit farmers’ willingness to invest.

Tariff costs and market multiples remain in focus

The outlook for the large farm equipment market in the U.S. and Canada remains unchanged at a decline of 15%-20%, while global forestry equipment is also expected to fall by about 10%. Despite tariff refunds, Deere still expects roughly $1.1 billion in direct tariff costs for the fiscal year.

On the market side, the number of hedge funds holding positions in the company fell to 59 from 62 in the latest quarter. As of Aug. 26, the shares traded at a forward price-to-earnings multiple of 27.03, while the short interest stood at 1.88% of free float.

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