DE — Deere & Company

Summary of Deere & Company Q1 2026 Earnings Call

1. Key Financial Results and Metrics:

• Net Sales: Increased by 13% year-over-year to $9.611 billion; equipment operations net sales rose 18% to $8.001 billion.
• Net Income: Attributable to Deere was $656 million, or $2.42 per diluted share.
• Operating Margin: Equipment operations reported a margin of 5.9%.
• Segment Performance:
  • Production & Precision Ag: Net sales up 3% to $3.163 billion; operating margin at 4.4%.
  • Small Ag & Turf: Net sales surged 24% to $2.168 billion; operating margin improved to 9%.
  • Construction & Forestry: Net sales jumped 34% to $2.67 billion; operating margin more than doubled to 5.1%.
• Financial Services: Net income of $244 million, with an outlook for $840 million for the fiscal year.

2. Strategic Updates and Business Highlights:

• All business segments showed year-over-year sales growth, with notable strength in Small Ag & Turf and Construction & Forestry.
• Increased order activity in North America, particularly in small ag and construction equipment.
• The company is optimistic about stabilizing large ag fundamentals, with improvements in order velocity and inventory management.
• New product launches, including a fully Deere-designed excavator, are set to enhance market competitiveness.

3. Forward Guidance and Outlook:

• Net Income Guidance: Updated to between $4.5 billion and $5 billion for fiscal 2026.
• Sales Growth Projections: Mid-single-digit growth expected for equipment operations; small ag sales forecasted to rise by 15%, while production and precision ag sales are expected to decline by 5% to 10%.
• Construction & Forestry: Expected net sales growth of around 15% for the year, driven by strong order books and infrastructure spending.
• Cash Flow from Operations: Projected to be between $4.5 billion and $5.5 billion, increased by $500 million at both ends of the range.

4. Bad News, Challenges, or Points of Concern:

• Large Ag Market: Despite improvements, the large ag equipment industry in the U.S. and Canada is still expected to decline by 15% to 20% in 2026.
• South America: Facing pressure from high interest rates and currency fluctuations, leading to cautious ordering behavior.
• Tariffs: Ongoing tariff costs are projected at $1.2 billion for the year, impacting margins.
• Competitive Pricing Pressures: Some segments, particularly Construction & Forestry, are experiencing competitive pricing pressures that could affect margins.

5. Notable Q&A Insights:

• Order Strength: Confidence among contractors is improving, driven by infrastructure projects and a growing backlog, although housing remains subdued.
• Pricing Dynamics: The company expects to maintain positive price realization, despite some downward adjustments in guidance for specific segments due to competitive pressures.
• Market Share Potential: Deere anticipates regaining some market share in large ag due to improved inventory management and order activity.
• Technological Adoption: There is a notable increase in the adoption of technology in combines, with a significant percentage of new orders including advanced automation features.
• Biofuel Opportunities: The company sees potential growth in biofuels, particularly with legislative support for increased consumption.

Overall, Deere & Company reported strong first-quarter results, driven by improved operational efficiencies and a diversified portfolio, while navigating challenges in specific markets and competitive pressures. The outlook remains cautiously optimistic, with strategic investments and product launches aimed at driving future growth.