Deere & Co. jumped to a record after earnings beat the highest of analyst estimates, even as the world’s largest farm machinery maker trimmed its profit outlook for the year due to the impact of Donald Trump’s tariffs.
Investors are betting the worst is over for Deere as farm markets stabilize and frictions between China and the US over tariffs seem to be abating, paving the way for a recovery in sales next year.
Tractor sales have been trending lower since a 2023 record as falling crop prices eroded farm income, leaving growers with less to spend on new equipment and causing inventories of machines to swell.
US farmers are now benefiting from stable crop prices, lower input costs and government payments even as trade uncertainty creates a headwind for the market, Josh Beal, Deere investor relations director, said in a conference call with analysts. “When excluding tariffs, we’ve seen some stabilization in the North American ag market,” he added.
While Deere’s net income was down 22% in the three months ended April, the number was well above the average of analyst estimates compiled by Bloomberg. Net sales also dropped less than projected.
Shares of the Illinois-based company rose as much as 6.8% in New York, figuring among the biggest gainers in the S&P 500 index. The stock has gained 21% this year.
Trump’s trade policies continue to be a risk factor, and the company trimmed the bottom of its full-year net income range by $250 million to $4.75 billion, citing the “heightened uncertainty.”
Levies are expected to have an impact of $500 million on costs in fiscal 2025, the company said in a conference call with analysts. Roughly $100 million of that was seen in the second fiscal quarter. Deere said it expects to offset that impact with higher pricing and cost reductions.
Still, the review implies a “less dire than feared tariff-impacted outlook,” Citigroup Global Markets Inc. analysts Kyle Menges and Randy Marker said in a note to clients.
Deere said it is prepared to spend $20 billion in the US over the next decade. The company came under fire last year from Trump, who threatening to hit Deere with steep tariffs if it moved a portion of its production to Mexico.
“These strategic investments are an opportunity to further leverage an already broad base of US assets,” Chief Executive Officer John C. May said during the call.
