Deere's Construction Boom Masks Deepening Farm Equipment Slump

Deere reported Q2 fiscal 2026 diluted EPS of $6.55, above consensus, with revenue of $13.37 billion, up 5% year over year. Full-year net income guidance remained $4.5 billion to $5.0 billion. Production and Precision Agriculture net sales fell 14% to $4.50 billion, with operating margin compressing to 15.7%. Small Agriculture and Turf rose 16% to $3.485 billion. Construction and Forestry increased 29% to $3.79 billion, with operating margin expanding to 14.8%. Financial Services declined 1% to $1.366 billion. Segment guidance projected continued weakness in Production and Precision Ag, strength in Small Ag and Turf, and durable growth in Construction and Forestry, supported by housing and roadbuilding outlooks and capital allocation including the Tenna acquisition and higher R&D.

"Deere (NYSE: DE | DE Price Prediction) posted Q2 fiscal 2026 diluted EPS of $6.55, beating consensus estimates of $5.70 to $5.81, on revenue of $13.37 billion, up 5.0% year over year. Management held full-year net income guidance at $4.5 billion to $5.0 billion. And yet shares fell almost 8% intraday, and closed trading at $531.35, down 5.2% for the day."

"Production and Precision Agriculture has historically been Deere's flagship margin engine. Yet it posted net sales of $4.50 billion for the quarter, down 14%, with operating margin compressed to 15.7%. Small Agriculture and Turf rose to $3.485 billion, up 16%. Construction and Forestry put up $3.79 billion, up 29%, with operating margin expanding to 14.8%. Financial Services came in at $1.366 billion, down 1%."

"The full-year segment guidance makes the picture clear. Production and Precision Ag: net sales down 5% to 10%. Small Ag and Turf: up approximately 15%. Construction and Forestry: up approximately 20%, with margins of 10% to 12%. The C&F growth trajectory is durable: up 27% in Q4 FY2025, up 34% in Q1 FY2026, and up 29% this quarter. U.S. housing starts are running at 1.465 million annualized as of April, and Deere's outlook calls for global roadbuilding up roughly 10%."

"Deere closed a $439 million acquisition of Tenna, a mixed-fleet construction asset-tracking platform. R&D climbed to $583 million from $549 million a year ago. CEO John May framed the result as evidence of "the strength of our diversified portfolio," with C&F and Small Ag offsetting agricultural pressure."

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