Deere & Company Q1 2026 Earnings Call Summary

Deere & Company Q1 2026 Earnings Call Summary Moby Intelligence Fri, February 20, 2026 at 5:32 AM GMT+8 3 min read In this article:

DE +0.07% LC=F -0.66%

Deere & Company Q1 2026 Earnings Call Summary - Moby

Strategic Performance Drivers and Market Dynamics

• Management believes fiscal 2026 marks the bottom of the current cycle, citing stabilization in North American large ag and robust growth in construction markets.

• Performance beat was primarily driven by higher-than-planned shipment volumes and operational efficiencies that offset significant incremental tariff expenses of approximately $1.2 billion.

• Strategic underproduction in fiscal 2025 successfully cleared the trade ladder, with late-model used tractor inventory declining over 40% from its 2025 peak, facilitating new machine replacement demand.

• Construction & Forestry outperformance is attributed to resilient infrastructure spending, data center growth, and a 50% sequential increase in order banks providing visibility through year-end.

• Small Ag & Turf growth of 24% reflects a normalization of the turf sector and solid demand from dairy and livestock producers supported by strong beef prices.

• South American performance remains pressured by high interest rates and currency volatility, leading to proactive production cuts in Brazilian combines to manage field inventory.

• The acquisition of Tenna aligns with a 'machine, task, and job site' strategy, moving beyond hardware to provide brand-agnostic digital fleet optimization for contractors.

Outlook and Strategic Assumptions

• Full-year net income guidance was raised to $4.5-$5.0 billion, assuming mid-single-digit net sales growth for equipment operations as market uncertainty stabilizes.

• Guidance assumes a shift to more favorable regional mix in the back half of the year as North American large tractor production increases relative to lower-margin international shipments.

• The outlook for North American large ag industry remains a decline of 15% to 20%, though management notes combines and tractors are trending toward the better end of that range.

• Future growth is predicated on a 'replacement cycle' thesis, as the aging U.S. fleet and improved used equipment health are expected to trigger necessary machine updates despite pressured crop receipts.

• Management anticipates continued adoption of high-margin precision technology, noting that 80% of new combine orders now include the 'ultimate' automation package.

Structural Factors and Risk Callouts

• Tariff headwinds remain a significant structural cost, projected at $1.2 billion for the year, though partially mitigated by operational efficiencies and India-specific relief.

• Government support programs, including the $12 billion Farmer Bridge Assistance, are viewed as critical liquidity 'bridges' that mitigate downside risk for farmer balance sheets.

• The launch of fully Deere-designed 20-ton excavators represents a multi-year strategic pivot to capture share in a segment comprising 40% of the North American construction market.

• Management flagged a 'cautious' environment in Brazil due to the upcoming presidential election and the impact of a stronger Real on U.S. dollar-denominated commodity margins.

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Q&A Highlights

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Pricing realization bridge and competitive pressures in Construction & Forestry

• Management trimmed the C&F price forecast by 0.5 points, explaining that rapid backlog growth delayed the implementation of new price actions announced in January.

• Competitive pricing in the excavator market remains challenging as some peers work through high field inventory, but Deere expects its new differentiated models to command value without aggressive discounting.

Sustainability of used inventory destocking and trade ladder health

• The 20% sequential decline in late-model used tractors was supported by increased pool fund contributions, which management intends to maintain to keep the channel healthy.

• Management noted that while Q1 is typically the strongest quarter for used reduction, the current inventory-to-sales ratio is significantly better than competitors, particularly in Brazil.

Impact of biofuels and trade flow shifts on demand

• Management highlighted that domestic consumption of soybeans for crush and corn for ethanol in both the U.S. and Brazil is providing a floor for demand that offsets volatile export trade flows.

• Future policy tailwinds like E15 legislation and renewable fuel standards are viewed as long-term structural drivers for commodity price stability.

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