Attendees view a John Deere 7R 270 row crop tractor on the Deere & Co. sales space in the course of the World Ag Expo on the Worldwide Agri-Heart in Tulare, California on February 11, 2025.
Patrick T. Fallon | AFP | Getty Photos
John Deere is dealing with a crossroads as the corporate continues to see weaker demand within the agricultural sector even whereas it has dedicated to investing hundreds of thousands in U.S. manufacturing and promised a brighter street forward.
The agricultural equipment firm warned on its fiscal third-quarter earnings name final week that it’s seeing a lot softer demand, posting important year-over-year decreases in web revenue and gross sales.
The corporate is working to place itself within the bigger agricultural sector, which has seen rising challenges with rising prices, local weather change impacts, labor shortages and extra.
Farmers have additionally been coping with decrease costs on crops like corn and grain and have pared again their spending because of this. In flip, Deere’s audience has pulled again on its willingness to purchase new agricultural gear.
Deere has additionally been hit by tariff prices, estimating that it may take a $600 million hit for the fiscal 2025 12 months. The corporate has already seen $300 million in tariff bills 12 months to this point.
Simply after reporting its earnings, the corporate confirmed to CNBC that it introduced 238 layoffs throughout its Illinois and Iowa factories, including to 1000’s who’ve been laid off over the previous 12 months. The corporate cited decreased demand and decrease order volumes as the primary components behind the job reductions.
“As said on our most up-to-date earnings name, the struggling ag financial system continues to affect orders for John Deere gear,” Deere advised CNBC in an announcement. “It is a difficult time for a lot of farmers, growers and producers, and straight impacts our enterprise within the close to time period.”
The producer employs greater than 70,000 folks globally.
Nonetheless, Deere has recognized sufficient inexperienced shoots to level to a less-troubling future.
On its most up-to-date earnings name, firm executives emphasised the expansion in demand in each Europe and South America after seeing weak spot in North America. Regardless of macroeconomic headwinds, Deere’s president of its worldwide agriculture and turf division stated the corporate stays assured in its future.
“We expect there’s optimistic tail winds from each what we see within the commerce offers, and we expect there are optimistic tail winds from what we see in tax coverage,” Cory Reed stated on the decision.
And in June, the corporate launched an announcement that “fantasy busted” any claims that Deere may have to shut down its U.S. manufacturing as a result of fall in demand. As a substitute, the corporate stated it was making a “daring transfer” to speculate $20 billion into U.S. manufacturing over the subsequent 10 years.
It follows the same string of bulletins from corporations attempting to shore up their “Made within the USA” bona fides since President Donald Trump took workplace. Earlier than the election, Trump threatened Deere with 200% tariffs if it moved manufacturing to factories in Mexico.
“Over the subsequent decade, we’ll proceed to make important investments in our core U.S. market,” CEO John Could stated within the assertion in June. “This underscores our dedication to innovation and progress whereas staying cost-competitive in a world market.”
What Wall Avenue is saying
Regardless of the struggles within the broader agricultural sector, Wall Avenue analysts on the entire stay optimistic about Deere’s street forward.
Oppenheimer analyst Kristen Owen wrote final week that she stays bullish on Deere and expects elevated confidence into 2026, telling CNBC that she believes the corporate is taking an “appropriately cautiously optimistic outlook.”
Even Truist analyst Jamie Cook dinner, who lowered his goal after Deere’s earnings final week and emphasised an unsure outlook for 2026, stated he nonetheless believes this 12 months marks a bottoming for the corporate’s earnings per share.
The corporate’s inventory has seen an almost 30% improve over the one-year interval.
Deere inventory
Deere’s historical past and the hit that the farming business has taken over the previous few years, D.A. Davidson analyst Michael Shlisky advised CNBC he cannot think about the corporate going a lot decrease from right here.
“The way in which I might say it’s 2025 could possibly be the worst, the bottom variety of tractor gross sales within the historical past of contemporary agriculture,” he stated, with the potential for the development to swing upward turning into imminent.
Whereas the optimism won’t be straight translating to gross sales at the moment, Shlisky stated the “hints” of progress are sufficient to make him excited concerning the firm’s future, together with the expansion in Europe and South America.
“When elements of the world are doing higher, the elements that are not doing as nicely are more likely to comply with,” Shlisky stated.
Whereas not commenting straight on the most recent spherical of layoffs, Shlisky stated he would not suppose traders could be stunned to see the required cost-cutting measures at this level within the firm’s trajectory.
Equally, Morgan Stanley analysts wrote in a word that whereas demand could also be lowering, they stand behind a thesis that Deere earnings have bottomed and that the corporate stays an “engaging alternative long run.”
Analyst Angel Castillo advised CNBC that Deere and the agricultural sector at giant are cyclical, so whereas the short-term stays unsure, the long-term outlook for the corporate is more likely to bounce again, noting that precision agriculture specifically is more likely to take off.
“This is without doubt one of the distinctive areas the place we expect even when there’s extra challenges subsequent 12 months, as we sort of count on, the earnings draw back danger is way more de-risked or already captured by expectation,” Castillo stated.
With its newest cost-cutting measures, Deere is saving itself by not overproducing or making a provide chain concern, Castillo added.
“The truth at the moment is that we’re nonetheless in an unsure atmosphere, and I believe they’re managing in a disciplined, rational technique to attempt to verify to not create a worse atmosphere,” he stated.
