Deere Reports Mixed Q4 Results as Production Costs Weigh on Profitability

Deere (DE) shares have declined approximately 0.5% over the past month following its latest earnings announcement, a performance that trails the broader S&P 500 benchmark. The question now facing investors: will this downward momentum persist, or could a reversal be imminent? A closer examination of the company’s financial results reveals the underlying factors driving market sentiment.

Q4 Performance: Revenue Beats Masked by Margin Pressures

Deere delivered fourth-quarter fiscal 2025 earnings (ended November 2, 2025) of $3.93 per share, falling marginally short of the consensus expectation of $3.96. Net earnings declined 14% year-over-year, as gains from higher shipment volumes were counterbalanced by elevated production expenses and tariff-related impacts.

Equipment operations generated net sales of $10.6 billion, reflecting a 14% year-over-year increase and surpassing the estimated $9.99 billion. When including financial services and other divisions, total net sales reached $12.4 billion, up 11% annually. However, the bottom line told a different story. Cost of sales surged 21% year-over-year to $7.94 billion, while gross profit contracted 2.7% to $4.45 billion. Selling, administrative and general expenses climbed 3.6% to $1.28 billion. As a result, total operating profit (incorporating financial services) slipped 7% to $1.35 billion for the quarter.

Segment-by-Segment Breakdown: Divergent Trajectories

Production & Precision Agriculture segment revenues climbed 10% year-over-year to $4.74 billion, driven by higher shipment volumes and favorable pricing dynamics. This figure exceeded internal projections of $4.27 billion. Operating profit, however, contracted 8% year-over-year to $604 million as production cost increases and tariff headwinds offset benefits from higher volumes and an improved sales mix.

Small Agriculture & Turf posted sales growth of 7% to $2.46 billion, surpassing estimates of $2.11 billion on increased demand. Yet operating profit collapsed 89% year-over-year to just $25 million, hammered by warranty expenses, tariff burdens, and manufacturing inefficiencies that far outpaced the initial projections of $124 million.

Construction & Forestry demonstrated resilience with revenues of $3.38 billion, representing 27% year-over-year growth on higher volumes and stronger sales mix execution. Operating profit increased 6% to $237 million, though gains were partially offset by tariff-driven production cost escalations versus the forecasted $319 million.

Financial Services contributed $1.55 billion in quarterly revenues, essentially flat at +2% year-over-year. Net income in this division reached $293 million compared with $173 million in the prior-year quarter, benefiting from improved financing spreads and a reduced provision for credit losses.

Balance Sheet and Cash Flow Position

DE maintained cash and cash equivalents of $8.28 billion at fiscal year-end 2025, up from $7.32 billion at the close of fiscal 2024. Operating cash flow totaled $7.5 billion for the full year, contrasting with $9.23 billion in the prior fiscal year. Long-term debt stood at $43.5 billion, compared with $43.23 billion at the prior fiscal year-end.

Full-Year Fiscal 2025: Earnings Miss and Sales Decline

On an annual basis, Deere reported fiscal 2025 earnings of $18.50 per share, falling short of the $18.53 consensus estimate. Annual net income deteriorated 28% year-over-year. Equipment operations net sales reached $38.9 billion, representing a 13% year-over-year decline yet exceeding the $38.3 billion estimate. Total net sales came in at $46 billion, down 11.7% annually.

Forward Guidance: Modest Recovery Expected in Fiscal 2026

Looking ahead, Deere projects fiscal 2026 net income between $4.00 billion and $4.75 billion. Production & Precision Agriculture segment sales are anticipated to decrease 5-10% year-over-year, while Small Agriculture & Turf revenues are forecast to rise 10%. Construction & Forestry sales are projected to increase 10%, with Financial Services segment net income expected at $830 million.

Analyst Sentiment Shift and Valuation Assessment

Since the earnings disclosure, estimate revisions have trended decidedly downward, with the consensus estimate shifting -27.39% lower. The stock currently carries a Growth Score of B, yet stumbles significantly on momentum metrics with an F rating. Its value assessment stands at C, positioning it in the middle quintile for value investors. The aggregate VGM Score remains C. With these divergent signals and persistent downward revisions, Deere garners a Zacks Rank #4 (Sell) designation, suggesting below-average returns are likely in the near to intermediate term.

The convergence of margin compression, tariff headwinds, and weakened forward guidance creates a challenging near-term environment for the equity.