Deere Beat Earnings Estimates. Why the Stock Is Falling.

Coming into Wednesday trading, Deere stock was up about 18% year to date and up about 8% over the past 12 months. (Dreamstime)

Key Points

• Deere’s fiscal fourth-quarter earnings per share were $3.93 on revenues of $12.4 billion, exceeding analyst expectations.
• Deere projects fiscal year 2026 net income between $4 billion and $4.75 billion, below Wall Street’s $5.3 billion estimate.
• Deere’s stock fell 4.4% in early trading following the release of its weaker-than-expected 2026 guidance.

Deere’s quarterly earnings report arrived on Wednesday morning, just before the U.S. Thanksgiving holiday. Investors aren’t going to be thankful for the company’s 2026 guidance.

Shares of the maker of heavy equipment dropped 5.7% on Wednesday, closing at $469.87, while the S&P 500 and Dow Jones Industrial Average both rose about 0.7%.

For its fiscal fourth quarter, which ended in October, Deere reported earnings per share of $3.93 from revenue of $12.4 billion. Wall Street was looking for earnings per share of $3.84 from total revenue of $11.8 billion, according to FactSet. A year ago, Deere reported fiscal fourth-quarter 2024 EPS of $4.55 from revenue of about $11.1 billion.

Higher costs offset higher prices and sales volume, wrote Jefferies analyst Stephen Volkmann in a Wednesday report. Margins in Deere’s equipment business were lower than he expected, but earnings from Deere’s lending operations gave the quarter a boost.

The main issue isn’t the quarterly result. The problem was guidance. Deere expects fiscal year 2026 net income of between $4 billion and $4.75 billion. Wall Street currently projects net income of $5.3 billion, up from $5 billion reported this fiscal year.

“Guidance light,” wrote Baird analyst Mig Dobre on Wednesday. “U.S. and Canada Large Ag [equipment] expectation down 15% to 20%, decline in excess of where we believe broader expectations sat.“

“Looking ahead, we believe 2026 will mark the bottom of the large ag cycle,” said CEO John May in a news release. He said that while margin pressure from tariffs and challenges in the market for large farm equipment remain, efforts to manage inventory and control costs, plus anticipated growth in other markets, set Deere up to “effectively manage the business and seize emerging opportunities as market conditions begin to recover.”

For the full year, Deere reported EPS of $18.50, down from $25.62 in fiscal year 2024. Revenue was $45.7 billion, down from $51.7 billion a year ago. Sales and earnings are down, along with farmers’ incomes. The Department of Agriculture estimates that U.S. farmers made about $128 billion in 2024, down from a peak of $182 billion in 2022.

Commodity prices always impact farm income. Today, benchmark corn prices are about $4.20 per bushel, up from recent lows of about $3.70. Corn prices were north of $8 per bushel in early 2022.

Net farm income in the U.S. for 2025 is estimated to hit $180 billion, but that money hasn’t turned into sales for Deere yet. The hope is that it will. Wall Street sees fiscal 2026 sales of about $41 billion, up from an expected $38 billion in fiscal 2025.

Deere started out fiscal 2025 predicting net income of between $5 billion and $5.5 billion. The most recent guidance, given in August, was for $4.75 billion to $5.25 billion. That contrasts with adjusted net income north of $10 billion in fiscal 2023, the year after net farm profits hit a record.

Hope for improvement has helped the stock. Coming into Wednesday trading, Deere stock was up 18% year to date, despite falling earnings.

Now, earnings estimates for 2026 sit at about $19.40 a share, according to FactSet. Those estimates are likely to come down. Falling estimates and lower earnings aren’t how investors wanted to start the holiday.

Write to Al Root at allen.root@dowjones.com