Deere Delivers Solid Q2 Beat Despite Lowered Outlook, Stock Rallies on Margin Strength

Deere & Company posted stronger-than-expected fiscal second-quarter results Thursday, surprising investors with robust margin performance and earnings that topped expectations—even as the company trimmed its full-year guidance amid persistent macroeconomic pressures. Despite sales falling sharply year over year and continued weakness in global farming demand, shares of Deere surged over 5% to a new all-time high as investors embraced the company’s disciplined execution and confidence in long-term investment.

The agricultural machinery giant reported net income of $1.804 billion, or $6.64 per share, beating consensus estimates of $5.58 by over $1 per share. Revenue came in at $12.76 billion, down 16% year over year, but well above Wall Street expectations of $10.79 billion. Deere’s equipment sales, the heart of its business, reached $11.17 billion—again ahead of projections. While net income was down from $2.37 billion a year ago, the results were seen as encouraging given the tough macro backdrop and declining farm income in recent years.

Breaking down the results by segment, Production and Precision Agriculture saw a 21% drop in sales due to lower shipment volumes, yet managed to maintain a healthy 22% operating margin. Management attributed the margin resilience to effective cost control and price realization, offsetting the negative impacts of currency fluctuations and weaker mix. Notably, while volumes were down, the company’s ability to sustain profitability in this key segment impressed analysts.

Small Agriculture and Turf, a segment more exposed to hobby farmers and consumers, posted a 6% year-over-year decline in revenue. However, operating profit rose modestly thanks to favorable inputs including lower warranty costs and improved manufacturing efficiency. Deere flagged that softness could persist in this segment, particularly given macro uncertainty and cautious consumer spending, but noted the business remains stable overall.

Construction and Forestry, Deere’s third major segment, experienced a 10% to 15% drop in sales according to guidance, impacted by ongoing weakness in the housing and infrastructure sectors. Executives pointed to high interest rates and global uncertainty as factors weighing on order activity for equipment in this division. Still, margins held up relatively well, and Deere signaled its intent to continue investing in long-term infrastructure.

Looking ahead, Deere lowered the bottom end of its full-year net income forecast, guiding to a range of $4.75 billion to $5.50 billion, down from the prior $5.0 billion to $5.5 billion. Analysts had expected $5.2 billion on average. While a guidance cut is rarely greeted positively, markets shrugged it off—largely because the midpoint still aligns with consensus and because the stock had already priced in some softness. Moreover, the company confirmed that its outlook includes the impact of the tariffs enacted as of May 13, though it did not break out a specific dollar impact.

Tariffs remain a wildcard for Deere. As a net exporter, the company benefits from global reach, but it also imports parts from Mexico and Europe. More importantly, tariffs affect Deere’s core customers—farmers—by increasing input costs and disrupting supply chains. Deere executives noted they don’t anticipate much room for price mitigation in fiscal 2025, reinforcing that the company, while resilient, won’t be immune to trade policy turbulence.

CEO John May remained upbeat despite the guidance revision, reiterating the company’s commitment to invest $20 billion in the U.S. over the next decade. “Our commitment to delivering value for our customers includes ongoing investment in advanced products, solutions, and manufacturing capabilities,” May said, adding that Deere is focused on staying competitive in an increasingly volatile global market.

Wall Street responded with cautious optimism. Raymond James’ Tim Thein called the earnings “solid” and maintained a Buy rating with a $530 price target, noting that Deere's execution amid macro headwinds is commendable. Baird’s Mig Dobre reiterated a Hold with a $501 target, suggesting that while the outlook was slightly softer, it was largely in line with expectations.

So why did the stock rally despite lowered guidance? Margin strength, solid execution, and upbeat commentary on long-term investments provided reassurance that Deere is navigating the trough in equipment demand better than expected. The company’s results mirrored a broader trend across the machinery space, where peers like AGCO and CNH Industrial also beat earnings expectations despite trimming forecasts. Deere’s performance, particularly in profitability, outshined both.

With the stock up 25% year to date and now trading near $522, Deere continues to ride investor optimism that the worst of the agricultural cycle may be behind it. U.S. farm income is projected to rebound in 2025, and if Deere can hold margins while navigating a choppy demand landscape, the company could be well-positioned for a stronger second half of the year. For now, investors are rewarding Deere not for perfection—but for resilience.