DE

Deere delivered a stronger-than-expected third quarter, with equipment operations net sales up 6% to $11.0 billion and operating margins of 14.4%, driven by disciplined execution, favorable pricing, and a $110 million tariff refund benefit. The company raised its full-year net income guidance to $4.75, $5.0 billion from a prior range of $4.5, $5.0 billion, reflecting confidence in Q4 momentum and improved tariff dynamics. However, the underlying agricultural market remains deeply challenged: production and precision agriculture (PPA) net sales fell 6% in the quarter, and management has revised the full-year PPA sales outlook to down approximately 10%, citing further softening in South America and Europe. The company now expects large ag equipment industry sales in the U.S. and Canada to decline 15, 20% for the year, with South America and Europe similarly pressured by elevated input costs, weak farm profitability, and currency headwinds. Against this backdrop, Deere's diversified portfolio is proving its worth: small ag and turf surged 12% in the quarter with an 18.4% operating margin, and construction and forestry grew 18% with strong pricing momentum, supported by infrastructure and data center demand. Management believes 2026 represents the trough of the agricultural cycle, pointing to early order program results showing mid-single-digit growth in planters and sprayers, healthy dealer inventory levels, and rising adoption of precision technologies like See & Spray (which is expected to be on roughly one-third of North American sprayers in model year 2027) as evidence that recovery is building. The tariff environment has also shifted favorably: direct tariff expense is now expected at