Deere & Company (Deere (DE)) reported second-quarter earnings on Thursday that topped analyst estimates, but the stock traded lower as investors weighed continued weakness in large agricultural markets and rising input costs tied to geopolitical tensions.

EPS of $6.55 beat analyst estimates of $5.73, while revenue of $13.369 billion exceeded estimates of $11.535 billion.

Segment Performance Remains Mixed

Worldwide net sales and revenues increased 5% year-over-year to $13.369 billion, while equipment operations net sales rose 5% to $11.778 billion.

“Our performance in the current market environment demonstrates the strength of our diversified portfolio. This is particularly reflected in the strong outcomes achieved by our Small Ag and Construction & Forestry divisions during this year,” stated Chairman and CEO John May.

“As we address ongoing challenges within global agricultural markets, our comprehensive portfolio continues to drive market share expansion and support our targets for sustained growth.”

Production & Precision Agriculture net sales fell 14% to $4.503 billion, while operating profit declined 39% to $706 million as lower shipment volumes and higher production costs pressured margins.

Small Agriculture & Turf sales rose 16% to $3.485 billion, with operating profit increasing 25% to $719 million.

Construction & Forestry sales climbed 29% to $3.790 billion, while Financial Services net income increased 18% to $190 million.

Tariffs And Construction Demand Remain Key Focus

Deere recorded a $272 million recovery tied to tariff refund claims after the U.S. Supreme Court invalidated tariffs imposed under the International Emergency Economic Powers Act.

A Deere executive said the company’s U.S. tariff exposure remains largely unchanged and expects 2026 tariff exposure to total about $900 million net of the refund recovery.

The company also said construction equipment demand remains robust, supported by infrastructure spending, including investments tied to data centers.

FY26 Outlook Maintained

The company maintained its fiscal 2026 net income forecast of $4.5 billion to $5.0 billion and said it continues investing in innovation through the cycle.

Deere expects equipment operations’ net operating cash flow to be $4.5 billion to $5.5 billion, and capital expenditures to be about $1.4 billion.

Agriculture Demand Faces Pressure

The company forecast fiscal 2026 Production & Precision Agriculture sales to decline 5% to 10%, while Small Ag & Turf sales are expected to rise about 15% and Construction & Forestry sales about 20%.

Deere expects U.S. and Canada large agriculture markets to decline 15% to 20% this year.

Management noted farmer sentiment remains weak despite recent grain price gains due to persistently high input costs and elevated interest rates.

An executive said rising global fuel and fertilizer costs are driving higher inflation across the agricultural economy, with the conflict in Iran further pressuring oil and fertilizer markets and increasing input costs for growers worldwide.

DE Price Action: Deere shares were down 7.47% at $548.00 at the time of publication on Thursday.