By Abhinav Parmar
Feb 19 (Reuters) – Farm-machinery maker Deere & Co raised its annual profit forecast and beat first-quarter results estimates on Thursday citing cost-cutting initiatives to protect margins and recovery in its construction and small agriculture units.
Its shares climbed 8.1% in morning trading.
The world’s largest farm-equipment maker previously scaled back factory production to counter weak demand for new machinery as lower crop prices and higher input costs push farmers to postpone big-ticket purchases.
The company is also working closely with dealers across its network to reduce inventory.
It expects net income for 2026 to range between $4.5 billion and $5 billion, compared with its prior forecast of $4 billion to $4.75 billion. Analysts on average expect Deere to post full-year net income of $4.45 billion, according to data compiled by LSEG.
“We’re encouraged by the ongoing recovery in demand within both the construction and small agriculture segments,” CEO John May said.
“These positive developments reinforce our belief that 2026 represents the bottom of the current cycle.”
Deere now expects 2026 net sales in two segments – Small Agriculture & Turf and Construction & Forestry – to rise about 15% each compared with its earlier forecast for a roughly 10% increase.
Oppenheimer analyst Kristen Owen said the company ended the quarter with relatively lean inventories, building historically less stock in the fourth and first quarters and leaving room for a potential upside as inventory normalizes through the year.
Deere posted net income of $656 million, or $2.42 per share, for the quarter, down from $869 million, or $3.19 per share, a year ago, but above analysts’ estimate of $2.05 apiece.
It’s first-quarter revenue rose 13% to $9.61 billion.
TARIFFS DRAG, FARM INCOME REMAINS WEAK
U.S. President Donald Trump’s sweeping tariffs have weighed on Deere’s operating profits. The Moline, Illinois-based firm has struggled with higher, tariff-driven production costs as it relies significantly on imported raw materials to manufacture its green and yellow tractors.
U.S. farmers are heading into another season of weak crop prices and elevated costs, forcing tough decisions about how, or if, to continue operating as ample grain supplies pressure markets.
The U.S. Department of Agriculture earlier this month forecast net farm income – a broad measure of profitability in the agricultural economy – to fall 0.7% to $153.4 billion in 2026 from a year ago.
Deere expects a pre-tax tariff hit of around $1.2 billion in fiscal 2026.
(Reporting by Abhinav Parmar in Bengaluru; Editing by Pooja Desai)
