What Happened?
Shares of agricultural and construction machinery company Deere (NYSE:DE) fell 5.3% in the afternoon session after the company lowered its full-year earnings guidance during its third-quarter report, signaling persistent challenges in the agricultural market.
The company now expects full-year earnings between $4.00 billion and $4.75 billion, a significant miss compared to the analyst consensus of roughly $5.00 billion. This forecast overshadowed its third-quarter results, where both revenue and earnings per share surpassed Wall Street estimates. For the quarter, revenue grew 33.6% year on year to $12.39 billion, and earnings per share came in at $3.93. Despite the quarterly beat, management cited "still-challenged end market conditions" for the weaker outlook. The company also reported a year-on-year decline in its operating margin, indicating rising cost pressures that worried investors.
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What Is The Market Telling Us
Deere’s shares are not very volatile and have only had 3 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock dropped 7.9% on the news that the company reported second-quarter results that, despite beating revenue expectations, showed a significant year-over-year decline in profitability.
While the company's revenue grew 5.5% year-over-year to $12.02 billion, surpassing analyst forecasts, investors focused on the weakening bottom line. Deere's earnings per share fell to $4.75 from $6.29 in the same quarter last year, although this figure did beat Wall Street's estimates. A key area of concern for investors was the company's shrinking profitability. The operating margin, a measure of core business profitability, contracted sharply to 13% from 20.2% a year ago, indicating that expenses grew faster than revenue. This significant decline in operational efficiency and the steep drop in year-over-year earnings appeared to outweigh the positive sales news, prompting a negative reaction from the market.
Deere is up 13.7% since the beginning of the year, but at $475.56 per share, it is still trading 10.5% below its 52-week high of $531.48 from May 2025. Investors who bought $1,000 worth of Deere’s shares 5 years ago would now be looking at an investment worth $1,815.
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