Business Context and Reporting Period
Company: DEERE & CO (Deere)
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Three months ended February 1, 2026 (Fiscal Q1 2026)
Comparison Period: Three months ended January 26, 2025 (Fiscal Q1 2025)
Deere operates through four segments: Production & Precision Agriculture (PPA), Small Agriculture & Turf (SAT), Construction & Forestry (CF), and Financial Services (FS). The company utilizes a 52/53-week fiscal year.
Key Financial Metrics
| Metric (in millions, except per share) | Q1 2026 | Q1 2025 |
|---|---|---|
| Net Sales and Revenues | $9,611 | $8,508 |
| Net Income Attributable to Deere | $656 | $869 |
| Diluted Earnings Per Share | $2.42 | $3.19 |
| Operating Cash Flow | $(890) | $(1,132) |
| Cash and Cash Equivalents | $6,798 | $6,601 |
| Total Debt (Short-term + Long-term) | $56,196 | $56,367 |
| Dividends Declared Per Share | $1.62 | $1.62 |
Material Changes vs. Prior Period
- Revenue Growth: Total net sales and revenues increased 13% to $9.611 billion, driven by higher sales volumes ($988 million) and favorable foreign currency translation ($227 million).
- Profitability Decline: Net income decreased 24.5% to $656 million. This decline was primarily due to incremental tariff costs of $272 million (after-tax) and the absence of favorable discrete tax items recognized in the prior year ($163 million after-tax impact).
- Cost of Sales: The cost of sales to net sales ratio increased to 78.5% from 74.0%, largely attributed to incremental tariffs, partially offset by production efficiencies.
- Segment Performance:
- PPA: Sales up 3%, but operating profit fell 59% to $139 million due to tariffs and unfavorable mix.
- SAT: Sales up 24% and operating profit up 58% to $196 million, driven by volume and price realization.
- CF: Sales up 34% and operating profit up 111% to $137 million, driven by strong U.S. demand.
- FS: Revenue down 5% due to the deconsolidation of Banco John Deere S.A. (BJD), though net income rose 6% to $244 million.
Guidance, Outlook, and Risks
- 2026 Outlook: Management expects net sales to increase in 2026 compared to 2025. While PPA sales are expected to decline due to subdued large agriculture demand in North and South America, this will be offset by improvements in SAT and CF segments.
- Tariff Impact: Incremental import tariffs incurred $361 million pretax in Q1 2026. A U.S. Supreme Court decision on February 20, 2026, invalidated certain tariffs, and Deere is evaluating potential recovery of previously paid amounts.
- Legal Proceedings: The FTC and several state Attorneys General filed an antitrust lawsuit alleging monopolization regarding repair tools and resources. Deere is in preliminary discussions for a potential resolution; the outcome remains uncertain.
- Acquisition: On February 18, 2026, Deere acquired Tenna LLC, a construction technology company, for $440 million (net of cash). Tenna will be included in the CF segment.
- Capital Allocation: The company repurchased $302 million of common stock in Q1 2026. Approximately $7.6 billion remains available under the current share repurchase plan.
Investor Verification Checklist
- Tariff Exposure: Verify the extent of potential tariff relief following the Supreme Court decision and its impact on future margins.
- Antitrust Litigation: Monitor the status of the FTC lawsuit regarding "right to repair" and potential settlement terms.
- PPA Demand: Assess the severity of the downturn in large agriculture equipment sales in North and South America as projected for the full year.
- Financial Services Portfolio: Review credit quality metrics and provision for credit losses given the economic pressures on farmers.
- Working Capital: Analyze the $880 million increase in inventories and its impact on future cash flows.