Deere raises full-year net income forecast as construction and small-ag rebound, but flags tariff cost headwinds.

What happened

Deere ($DE) beat quarterly expectations and lifted its FY2026 net income outlook to $4.5B–$5.0B (up from $4.0B–$4.75B). Management pointed to cost actions plus improving demand in Construction and Small Ag and Turf, and the stock jumped on the day.

Deere also warned that tariffs could add roughly $1.2B of cost in FY2026, and the farm economy backdrop is still pressured by weaker farm income.

Why this matters for traders

This is a “cycle read-through” story. Deere is basically saying: big-ag is still choppy, but pockets of demand are stabilising or turning up, and the company’s cost structure is doing more of the work.

So you’ve got a bullish signal for select Industrials tied to construction/smaller equipment, while the tariff and farm-income notes keep a lid on anything overly “straight-line recovery.”

Winners

Farm and construction equipment OEMs

Deere’s raised profit outlook and “rebound in construction/small ag” narrative can re-rate the whole machinery complex—investors start pricing in operating leverage as utilisation improves and discounting less-bad demand.

Names: $DE (Deere), $CAT (Caterpillar), $CNH (CNH Industrial)

Construction activity beneficiaries

If Deere is seeing improving construction-related demand, rental fleets typically benefit from better utilisation, steadier rate cards, and higher equipment turns—especially when contractors prefer renting to manage capex.

Names: $URI (United Rentals), $HRI (Herc Holdings)

Precision/automation and productivity tech

When farm income is tight, buyers often prioritise ROI upgrades (guidance, precision workflows, telematics, maintenance optimisation). A “soft but stabilising” equipment cycle can still support tech spend that boosts productivity and reduces operating cost per acre/hour.

Names: $TRMB (Trimble), $PTC (PTC)

Losers

Tariff-sensitive industrial manufacturers

Deere explicitly called out a large tariff-driven cost hit for FY2026. That’s a reminder that heavy manufacturing margins can get clipped fast when components/materials reprice and pricing power lags.

Names: $PCAR (Paccar), $OSK (Oshkosh)

Crop input makers

If farmers are still dealing with weaker economics, they can delay or optimise spend on fertiliser and other inputs. Deere’s commentary keeps the “farm wallet” debate alive, even as some machinery demand improves.

Names: $MOS (Mosaic), $CF (CF Industries)

Agriculture credit and financing exposure

The Reuters piece highlights continued pressure on farm economics. When the underlying borrower base is stressed, credit metrics matter more—higher delinquencies and tighter underwriting can ripple through lenders and financing providers.

Names: $AGM (Farmer Mac), $COF (Capital One)

Quick trading angles to watch

Options/trend: $DE strength can drag the machinery complex higher, but keep an eye on headline risk around tariffs and any follow-through commentary from peers.

Pairs idea: “Construction rebound” beneficiaries (OEMs/rentals) vs “farm wallet sensitivity” names (inputs/credit).

Key watch items next: management commentary on pricing vs cost inflation, order trends in small ag + construction, and how much of the tariff hit can be offset or passed through.

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