Deere & Company (DE) Stock: Drop Over 5% After Q3 Results Show Strength Despite Margin Pressure

TLDR

• Deere reported Q3 CY2025 revenue of $12.39 billion, up 33.6% year on year.
• EPS of $3.93 beat expectations despite falling from last year.
• All major segments have declined over the past two years.
• Full-year earnings guidance was cut to $4.00–$4.75 billion.
• FY26 outlook suggests the bottom of the large agriculture cycle.

Deere & Company (NYSE: DE) closed at $498.13, gaining 2.24%, before falling to $478.78 in pre-market trading, and down more than 5% after market open on Wednesday.

Deere & Company, DE

The company released its Q3 CY2025 earnings, reporting strong headline numbers but issuing weaker guidance. Earnings for the quarter were $3.93 per share, with the report reflecting both recovery signs and cyclical challenges across agriculture and construction markets.

Q3 CY2025 Earnings Overview

Deere’s Q3 CY2025 results exceeded expectations. Revenue reached $12.39 billion, beating estimates of $11.62 billion and growing 33.6% year over year. GAAP EPS of $3.93 topped consensus by 2.5%. Despite the beat, EPS still declined from $4.55 a year ago, reflecting persistent margin pressure.

The company reduced its full-year earnings guidance to a range of $4.00–$4.75 billion, well below analyst expectations near $5.00 billion. Management cited difficult demand conditions and continued weakness in large agriculture markets.

Segment Performance and Revenue Trends

Long-term growth trends show softer momentum. Over the past five years, Deere expanded revenue at a 5.4% CAGR, a modest pace relative to the industrials sector. However, the last two years brought declines, with total revenue falling 14.4% annually due to cyclical downturns.

All three major segments—Production & Precision Agriculture, Construction & Forestry, and Small Agriculture & Turf—posted year-on-year declines over the last two years. Production & Precision Agriculture dropped 14.3%, Construction & Forestry fell 11%, and Small Agriculture & Turf decreased 14.3% on average.

Despite these trends, the latest quarter delivered a sharp rebound. Analysts expect 14% revenue growth over the next year, implying confidence in new product cycles and early signs of recovery.

Margin Dynamics

Deere’s profitability remains strong by industry standards. Over the last five years, the company maintained an average operating margin of 19.9%. Even so, margin compression has been evident. Operating margin fell 5.4 percentage points over five years and dropped to 10.9% in Q3, down from 15.6% in the prior-year quarter. This indicates rising costs outpacing revenue gains.

Free cash flow margin also declined from 47.4% to 14.3%, showing tighter cash generation conditions.

EPS, Buybacks, and Earnings Quality

EPS growth paints a mixed picture. Over five years, Deere delivered a strong 16.3% EPS CAGR, outpacing revenue. The improvement was helped by stock buybacks, which reduced share count by 14.5% during the period. In contrast, EPS fell 26.9% annually over the last two years, aligning with weaker segment demand.

FY26 Outlook and Market Reaction

Deere expects FY26 net income of $4.00–$4.75 billion and operating cash flow of $4.0–$5.0 billion. Management believes 2026 will mark the bottom of the large agriculture cycle. Shares dropped 5% pre-market following the guidance cut.

Performance Overview

As of November 25, 2025, YTD return is 18.76%, ahead of the S&P 500’s 15.03%. One-year return stands at 9.17%, while the five-year return is a strong 107.23%, outpacing the broader market.

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