DE Earnings Preview: $4B Net Income Floor at 72% Odds

The Core Question

Deere is guiding to $4.0–4.75B in FY2026 net income — a 25%+ decline from FY2025 — while absorbing a $2.4B headwind gauntlet ($1.2B tariffs + $1.2B labor). Management says 2026 marks the large ag cycle trough. Does the structural margin improvement hold?

For the full five-lens assessment covering Deere's moat durability, regulatory exposure, and tail risk scenarios, read the deep dive here.

Ensemble Forecast

Key Market

FY2026 Net Income Below $4.0B

Downside Probability

28%

Model Agreement

0.92

Strong consensus

Our nine-model ensemble assigns 28% probability that Deere's FY2026 net income falls below the $4.0B guidance floor — implying 72% confidence that structural margin gains (+450bps vs. the 2016 trough) provide sufficient buffer. Across all eight active markets, the six bearish scenarios range from 17–33% probability, while the two bullish markets (precision ag adoption at 68%, dividend increase at 78%) reinforce the “manageable trough” thesis. See all eight markets on the DE forecasting page.

Earnings Scorecard — February 19

FY2026 Net Income Guidance

Bull: ≥$4.375BBear: <$4.0B

The central question. Ensemble assigns 28% probability the $4.0B floor breaks. Maintained or raised guidance would validate the trough thesis; a cut below the floor escalates across multiple markets.

Tariff Impact Update

Bull: ≤$1.2BBear: >$1.5B

Management guided $1.2B pretax tariff cost (~$300M/quarter), up from $600M in FY2025. Escalation above $1.5B would compress the already thin Q1 margin structure and stress the full-year range.

Q1 PPA Operating Margin

Bull: >5%Bear: <3%

Full-year guidance is 11–13%, but Q1 is expected at “low single digits” due to lean production. Below 3% suggests the full-year range is at risk; above 5% implies margin resilience despite the trough.

FS Delinquency Rates

Bull: StableBear: >10% QoQ

Ensemble assigns 22% probability of a 25%+ delinquency spike by Q3 FY2026. Rising farmer distress in a prolonged ag downturn is the hidden amplifier — stable credit quality would be the most reassuring signal from this call.

CFO Transition Signal

Bull: Successor namedBear: Interim only

CFO Josh Jepsen departs effective February 19 — the same day as earnings. No permanent successor has been publicly named. A clear mandate and continuity signal would reduce governance gap risk during peak operational stress.

Current Assessment

Deere is classified as “Price at Value” at medium confidence. The competitive moat remains defensible (450bps structural margin improvement vs. last cycle trough), and the ensemble sees a 78% probability of a dividend increase in FY2026. However, regulatory exposure is elevated (FTC litigation, state right-to-repair legislation), and tail risk severity is material. Read the full thesis assessment. We will update within 24 hours of the February 19 earnings release.

Full five-lens analysis with moat mapping, regulatory risk assessment, stress testing, and all eight active prediction markets

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