Deere lifts full-year profit forecast as construction, sales rebound; shares rise

By Abhinav Parmar

Feb 19 (Reuters) - Farm-machinery maker Deere & Co DE.N raised its annual profit forecast and reported first-quarter results above estimates on Thursday citing a recovery in its construction and small agriculture units as well as cost cuts mitigating weak demand.

Its shares rose 5.7% in premarket trading.

The world's largest farm-equipment maker previously scaled back factory production to counter weak demand for new machinery as lower crop prices and higher input costs push farmers to postpone big-ticket purchases.

The company is also working closely with dealers across its network to reduce inventory.

It expects net income for 2026 to range between $4.5 billion and $5 billion, compared with its prior forecast of $4 billion to $4.75 billion. Analysts on average expect Deere to post full-year net income of $4.45 billion, according to data compiled by LSEG.

"While the global large agriculture industry continues to experience challenges, we're encouraged by the ongoing recovery in demand within both the construction and small agriculture segments," CEO John May said.

"These positive developments reinforce our belief that 2026 represents the bottom of the current cycle."

Deere now expects 2026 net sales in two segments - Small Agriculture & Turf and Construction & Forestry - to rise about 15% each compared with its earlier forecast for a roughly 10% increase.

Oppenheimer analyst Kristen Owen said the company ended the quarter with relatively lean inventories, building historically less stock in the fourth and first quarters and leaving room for a potential upside as inventory normalizes through the year.

It posted net income of $656 million, or $2.42 per share, for the quarter, down from $869 million, or $3.19 per share, a year ago, but above analysts' estimate of $2.05 apiece.

Deere's first-quarter revenue rose 13% to $9.61 billion.

TARIFFS WEIGH, FARM INCOME REMAINS WEAK

U.S. President Donald Trump's sweeping tariffs have weighed on its operating profits, making Deere one of the many industrial companies affected by policy shifts from the White House.

The Moline, Illinois-based firm has struggled from higher, tariff-driven production costs as it relies significantly on imported raw materials to manufacture its green and yellow tractors.

U.S. farmers are heading into another season of weak crop prices and elevated costs, forcing tough decisions about how, or if, to continue operating as ample grain supplies pressure markets.

The company expects a pre-tax tariff hit of around $1.2 billion in fiscal 2026.