Deere's Q4 Earnings: A Harbinger of Cyclical Recovery in Agriculture and Construction?

John Deere's Q4 2025 earnings report, released on November 26, 2025, has sparked intense debate among investors and analysts about whether the company's performance signals an impending cyclical recovery in the agriculture and construction sectors. While Deere's results reflect ongoing headwinds-such as weak farmer sentiment, low commodity prices, and tariff-driven cost pressures-their strategic investments in precision agriculture and resilient financial metrics suggest a nuanced picture. This analysis explores whether Deere's earnings are a harbinger of sector recovery or a reflection of entrenched challenges.

Deere's Q4 Performance: A Mixed Bag

Deere's Q4 2025 earnings report fell short of expectations, with analysts forecasting earnings per share (EPS) between $3.81 and $3.96, a decline from the $4.55 recorded in Q4 2024. Revenue estimates of $9.81–$9.99 billion, however, indicated a modest year-over-year increase. The company's performance was uneven across segments: the Production & Precision Agriculture segment saw an 8.6% rise in operating profit despite declining revenue, while the Small Agriculture & Turf segment faced a 46.9% drop in operating profit. The Construction & Forestry segment, though posting a 23.7% revenue increase, experienced a 2.7% decline in operating profit. These results underscore Deere's ability to maintain margins amid sector-wide challenges but highlight vulnerabilities in smaller ag and turf markets.

The broader context is equally telling. Weak farmer spending, exacerbated by low commodity prices and high input costs, has depressed agricultural demand. Meanwhile, tariffs on steel and aluminum have added to Deere's production costs, squeezing margins. Despite these pressures, Deere's full-year 2025 net income guidance of $4.75–$5.25 billion suggests disciplined cost management and operational resilience.

Sector-Wide Downturns and Recovery Signals

The agriculture and construction equipment sectors are navigating a cyclical downturn in 2025. In agriculture, U.S. and Canadian low-horsepower tractor shipments are 13–18% below prior-year levels, with high-horsepower tractors and combines also declining by 17–10%. These trends are driven by softening commodity prices, elevated interest rates, and reduced government support. However, improving livestock margins and projected net farm income growth in 2026 offer hope for a rebound.

The construction sector faces similar challenges. Global construction demand is expected to rise by 2.77% in 2025, with stronger growth anticipated in 2026 and 2027 as interest rates ease. Emerging markets, less impacted by rate hikes, are projected to outperform advanced economies. Yet, trade wars and federal spending freezes threaten to delay recovery. Deere's Construction & Forestry segment, which saw a 23.7% revenue increase in Q4, aligns with these mixed signals, suggesting some resilience in infrastructure and energy projects.

Deere's Strategic Positioning for Recovery

Deere's long-term positioning appears geared toward navigating these cycles. The company has invested heavily in precision agriculture technologies, like See & Spray and Harvest Settings Automation, which enhance efficiency and sustainability. These innovations not only address immediate productivity challenges but also align with global food systems goals, potentially insulating Deere from future downturns.

Financially, Deere maintains a strong net margin of 10.94%, though its debt-to-equity ratio of 2.66 raises concerns. Analysts like RBC Capital and UBS highlight Deere's R&D investments as a competitive advantage, arguing they reduce earnings cyclicality and strengthen its moat. UBS further predicts 2026 could be the last year of earnings decline, with a recovery expected in 2027.

Analyst Perspectives: Caution and Optimism

Analysts remain divided. Bullish views emphasize Deere's technological edge and disciplined inventory management. Truist noted Q3's better-than-expected performance, crediting cost controls in the Small Ag and Turf segment. A discounted cash flow analysis suggests Deere's stock is undervalued by 41.8%, with a fair value of $837.07 per share.

Conversely, bearish analysts warn of near-term risks. JPMorgan highlighted input cost pressures from tariffs, which could erode margins. Evercore ISI and DA Davidson cautioned that sector recovery timelines remain uncertain, with CNH Industrial's 71% EBIT decline illustrating the depth of the downturn.

Conclusion: A Harbinger or a Cautionary Tale?

Deere's Q4 earnings reflect a sector in transition. While the company's financial discipline and technological investments position it for long-term growth, near-term challenges-including tariffs, high interest rates, and weak farmer sentiment-suggest the recovery is not yet fully underway. The key for investors lies in balancing Deere's resilience with macroeconomic uncertainties. If 2026 sees improved agricultural fundamentals and easing construction costs, Deere could indeed signal a cyclical rebound. However, until then, the path remains fraught with headwinds.