Deere & Company (NYSE:DE) shares slid on Wednesday as the agricultural equipment giant warned of a $1.2 billion tariff hit in fiscal 2026, overshadowing a fourth-quarter earnings beat.
Check Out DE’s Stock Price Here.
Deere Faces $1.2 Billion Tariff Headwind In FY26
Despite reporting topping earnings estimates, Deere issued a cautious outlook for the coming year. The company expects net income to fall to between $4.0 billion and $4.75 billion, down from over $5 billion in fiscal 2025.
Management attributed the weaker forecast to declining demand in the large agriculture sector and a sharp rise in trade-related costs.
Christopher Seibert, Manager of Investor Communications, quantified the trade headwinds embedded in the new guidance during the earnings call.
"Included in this estimate is projected pretax direct tariff expense of approximately $1.2 billion, with additional inflationary pressures also contemplated from the indirect impacts of tariffs," Seibert said.
Investor Relations Director Josh Beal later clarified that this represents a $600 million incremental increase from 2025 levels.
Large Tractor Inventory At 17-Year Low
To combat these costs and falling demand, Deere has aggressively tightened its belt, reporting that inventory for its largest tractors has dropped to historically low levels.
"To put in perspective how low absolute inventory levels are, new field inventory for Deere 220 horsepower and above tractors ended fiscal 2025 at the lowest unit level we've seen in over 17 years," Beal noted.
Executives described the upcoming year as a transitional period, but signaled that the worst may soon be over.
"Looking ahead, we believe 2026 will mark the bottom of the large ag cycle," said John May, Chairman and CEO. "While ongoing margin pressures from tariffs and persistent challenges in the large ag sector remain, our commitment to inventory management and cost control positions us to effectively manage the business."
See Also: Deere Says Large Ag Hits Bottom In 2026 With Tariffs Still Hurting
Construction, Small Ag Segments To Grow In 2026
While the large agriculture segment faces contraction, Deere sees bright spots elsewhere. The company forecasts its construction and forestry business, as well as its small agriculture and turf segment, will both grow approximately 10% in fiscal 2026.
Josh Jepsen, Senior VP and CFO, emphasized the company’s resilience, noting that despite a 30% decline in the North American large ag industry this year, Deere delivered margins "over 450 basis points better than 2016, the last time we were at this point in the cycle."
Deere Underperforms The Market In 2025
While DE shares have risen 12.36% year-to-date, the S&P 500 index has returned 16.09% in the same period. Over the year, Deere has gained only 0.83%. On Wednesday, after reporting earnings, the stock fell 5.67% to $469.87 apiece.
It maintains a stronger price trend over the short, long, and medium terms, with a moderate value ranking. Additional performance details, as per Benzinga’s Edge Stock Rankings, are available here.
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