Deere & Co (DE) shares tumbled 7.1% to $520.62 in late-morning trading on Thursday, significantly underperforming the broader market. The SPDR S&P 500 ETF (SPY) fell just 0.4%, while the Industrial Select Sector SPDR Fund (XLI) declined 0.7%. The sharp selloff came despite the farm and construction equipment maker reporting better-than-expected fiscal second-quarter results, as investors focused on the company's decision to keep its full-year profit forecast unchanged.
The market reaction underscores a shift in investor focus: the question is no longer whether Deere can beat a single quarter, but whether demand for large tractors and combines has finally bottomed. Thursday's results showed continued pressure in the large agriculture business, even as construction and smaller equipment segments posted gains.
Deere reported fiscal second-quarter net income of $1.773 billion, or $6.55 per diluted share, down from $1.804 billion, or $6.64 per share, a year earlier. Worldwide net sales and revenue rose 5% to $13.37 billion, while equipment net sales reached $11.78 billion. Analysts had expected earnings of $5.70 per share on net sales of $11.54 billion, according to LSEG data cited by Reuters.
Chairman and CEO John May highlighted the "strength of our diversified portfolio" but acknowledged "ongoing challenges" in global agricultural markets. He said Deere would continue investing through the cycle while relying on "disciplined operations and resilience."
The internal performance split explains the stock's movement. Deere's Production & Precision Agriculture segment, its largest unit and most tied to large-scale crop farming, saw sales drop 14% to $4.50 billion and operating profit plunge 39%. In contrast, Construction & Forestry sales surged 29% to $3.79 billion, and Small Agriculture & Turf sales rose 16% to $3.49 billion.
"While encouraged by the upside to the construction segment, investors are still looking for signs of recovery in the agriculture segments," said Oppenheimer analyst Kristen Owen, describing the picture as a "mixed bag globally."
Deere maintained its fiscal 2026 net income forecast at $4.5 billion to $5.0 billion. The company expects U.S. and Canada large agriculture industry sales to fall 15% to 20% this year and South America tractor and combine demand to decline about 15%. However, it raised its own Construction & Forestry sales outlook to approximately 20% growth.
This puts Deere in a different position compared to some machinery peers. Reuters reported that Caterpillar (CAT) and CNH Industrial (CNH) had recently pointed to better construction demand as dealers rebuilt inventory. Yet Deere's stock fell harder than Caterpillar, CNH and AGCO (AGCO) on Thursday, as agriculture remains the bigger concern.
The quarter also included a $272 million tariff refund related to claims accepted by U.S. Customs and Border Protection after a Supreme Court decision invalidated tariffs imposed under the International Emergency Economic Powers Act. This boosted reported results but did not alter the full-year profit target.
Looking ahead, analysts see both upside and downside risks. A faster rebound in crop prices, lower financing costs, or firmer equipment orders could make Deere's unchanged guidance appear cautious. Conversely, farmers may continue to delay big-ticket purchases, costs could remain sticky, trade and tariff policy could stay unsettled, or legal scrutiny over repair restrictions could become a bigger distraction. Deere listed the farm cycle, input costs, interest rates, trade policy and right-to-repair litigation among its risks. Manufacturing Dive reported this week that a new class-action lawsuit targets Deere's repair practices in lawn, turf and construction equipment.
For now, the market is treating Deere's earnings beat as a smaller story than the still-soft farm cycle. The next move in the stock may depend less on construction strength and more on whether large agriculture demand stops getting worse.
