Deere Shares Fall 5% as Grim 2026 Outlook Overrides Earnings Beat
The heavy-equipment manufacturer is forecasting the 'bottom of the large agriculture cycle,' signaling prolonged pressure on farmer income and equipment demand.
Shares of Deere & Co. (DE) fell as much as 5% in Wednesday trading after the agricultural machinery giant issued a downbeat forecast for fiscal year 2026, overshadowing a fourth-quarter earnings report that surpassed analyst expectations. The company’s cautious outlook suggests that the cyclical downturn in the farm economy is set to deepen before it recovers.
The Moline, Illinois-based manufacturer projected net income for fiscal 2026 to be in a range of $4.00 billion to $4.75 billion. This forecast fell short of Wall Street’s estimates and signaled a continued decline from the $5.027 billion reported for the full fiscal year 2025. In a statement, CEO John May described the upcoming period as the 'bottom of the large agriculture cycle,' a stark assessment that quickly reset investor expectations and erased gains from its quarterly performance.
For its fourth quarter ending in October, Deere reported net income of $1.065 billion, or $3.93 per share. While this represented a 14% decline from the same period last year, it comfortably beat the analyst consensus of $3.85 per share. Revenue also topped forecasts, coming in at $12.39 billion. However, the market’s forward-looking nature meant the surprisingly robust quarterly results were quickly eclipsed by the sobering guidance.
The company’s forecast reflects a challenging environment for its core customer base. Farmers are grappling with lower crop prices, stubbornly high input costs, and elevated interest rates, which collectively squeeze profitability and curb appetite for major capital investments like new tractors and combines. This dynamic is leading to softer demand for Deere’s iconic green and yellow equipment after several years of robust sales.
“Deere’s outlook confirms that the farm rebound remains elusive,” as the agricultural sector navigates a normalization of demand following a period of high commodity prices. The company’s Production and Precision Agriculture division, its largest segment, is expected to see sales decline by 15% to 20% in the coming year.
Despite the gloomy near-term outlook, some Wall Street analysts are looking past the cyclical trough, viewing the downturn as a potential entry point for long-term investors. Analysts at UBS reaffirmed their 'Buy' rating on the stock following the report, pointing to potential for a significant earnings rebound in fiscal year 2027. The bank maintained a 12-month price target of $535, suggesting confidence in Deere’s ability to navigate the downturn through its technology-focused offerings and operational efficiency.
Deere has been heavily investing in precision agriculture technology, including autonomous tractors and data-driven farming solutions, which it believes will drive long-term growth and command higher margins. These technologies are designed to help farmers increase yields and reduce costs, making them valuable even in a tight economy. Management is betting that this technological edge will help it weather the current slump and emerge stronger.
Investors will be closely watching agricultural commodity prices and farmer sentiment in the coming quarters for signs of a turnaround. Until then, Deere’s performance will serve as a key barometer for the health of the global farm economy, with its latest forecast indicating that the fields may lie fallow for a while longer before the next growth season begins.