Breaking Down Deere & Company (DE) Financial Health: Key Insights for Investors

You're looking at Deere & Company (DE) and seeing a stock that's outperformed the S&P 500 over the last year, but you're defintely wondering if the cyclical downturn in agriculture equipment is finally priced in. The short answer is: the market is still wrestling with the reality of a significant earnings contraction in fiscal year 2025. Management's latest outlook projects full-year net income to land between $4.75 billion and $5.25 billion, a sharp drop from the $7.1 billion reported in fiscal 2024, and analysts are forecasting a corresponding Earnings Per Share (EPS) of around $18.57 per share. Here's the quick math: that contraction is driven by a projected sales decline of 15% to 20% in the core Production and Precision Agriculture segment, plus a nearly $600 million pre-tax headwind from new import tariffs. Still, the company is showing resilience by aggressively managing inventory, with North American large tractor stock down 45% year-over-year, and the Financial Services division remains a reliable anchor, projecting a net income of approximately $770 million. We need to map out if their strategic focus on precision agriculture technology can offset the near-term weakness in commodity prices and high interest rates.

Revenue Analysis

You're looking at Deere & Company (DE) right now and the direct takeaway is clear: the equipment sales boom is over, so the company is navigating a significant near-term revenue contraction. For the first nine months of fiscal year 2025, worldwide net sales and revenues saw a sharp decline of 18% compared to the same period last year, totaling $33.290 billion. This is a material shift from the growth years, and it means you need to focus on segment resilience, not top-line expansion.

The primary revenue stream remains the sale of heavy machinery, but the company's financial health is also supported by its financing arm. Here's the quick math for the full fiscal year 2025, based on analyst projections: total revenues are expected to land around $44 billion, a notable decrease from the prior year. This revenue is heavily weighted toward the agricultural side of the business.

The core of Deere & Company's revenue is split across three main segments, with equipment sales dominating, but Financial Services providing a crucial counter-cyclical buffer. The biggest contributor, Production and Precision Agriculture, is feeling the most pain as farmers delay large capital expenditures due to market uncertainty and high used equipment inventory.

To be fair, the decline is not uniform. The Small Agriculture and Turf segment, which caters to a broader base including homeowners and commercial landscapers, has shown more resilience. Still, the overall picture is one of a market correction, which is why management is focused on inventory control and cost management, not chasing sales volume. You can dive deeper into the ownership structure and market sentiment by reading Exploring Deere & Company (DE) Investor Profile: Who's Buying and Why?

• Production and Precision Ag: $26 billion (approx. 59% of total revenue).
• Construction and Forestry: $12 billion (approx. 27% of total revenue).
• Financial Services: $5.9 billion (approx. 13% of total revenue).

Segment Performance and Near-Term Risks

The most significant change in the revenue streams is the dramatic downturn in the flagship Production and Precision Agriculture segment. In the third quarter of 2025 alone, net sales for this segment dropped by 16% year-over-year. This volume and mix contraction caused the segment's operating profit to plummet by a staggering 50%, falling to $580 million from $1.16 billion in Q3 2024. That's a massive hit.

The Construction and Forestry segment is also under pressure, with Q3 2025 net sales down 5% and operating profit falling 47% to $237 million, largely due to unfavorable price realization. The only bright spot is the Financial Services segment, which saw net income increase by 34% in Q3 2025 to $205 million, providing a steady, defintely needed contribution in a tough environment.

Here is a breakdown of the sales contraction across the equipment segments for the full fiscal year 2025, based on the company's guidance, which reflects lower shipment volumes and cautious customer spending:

Profitability Metrics

You need to know if Deere & Company (DE) is still a profit powerhouse, and the short answer is yes, but the growth engine is slowing down. The company is navigating a cyclical downturn in the agricultural market, but its superior operational efficiency is helping it maintain margins significantly above industry averages, a defintely bullish signal for long-term investors.

As a seasoned analyst, I look at three core margins to gauge financial health: Gross, Operating, and Net. For the Trailing Twelve Months (TTM) ending in mid-2025, Deere & Company shows a Gross Profit Margin of around 37.71%, which is the raw profit after the cost of goods sold (COGS) is factored out. This is a strong indicator of pricing power and efficient manufacturing.

The Operating Profit Margin (Earnings Before Interest and Taxes, or EBIT) for the same period sits at about 19.96%. This metric is crucial because it shows how well the core business is running before the impact of debt and taxes. Finally, the TTM Net Profit Margin, which is the bottom line, is approximately 11.77%. Here's the quick math: for every dollar of sales, nearly 12 cents is kept as profit.

The full-year 2025 outlook reflects this challenging environment. Management is forecasting full-year net income to be in the range of $4.75 billion to $5.50 billion, a notable step down from the prior year's peak, but still a robust number in a contracting market.

Margins vs. The Industry

When you compare Deere & Company to the industrial machinery sector, their operational excellence truly stands out. They are generating a higher profit from sales than the typical competitor. This is a testament to their brand strength, pricing power, and the value proposition of their precision agriculture technology.

To be fair, the TTM Gross Margin of 27.42% cited in one comparison is lower than the industry average of 36.59%, but this can be misleading due to different calculation methodologies or data lags. However, the net result-the Net Profit Margin-is where Deere & Company shines, proving they manage their selling, general, and administrative (SG&A) costs and taxes better than the competition.

Note: Industry average Gross Margin is subject to variability; Deere's high reported TTM Gross Margin of 37.71% suggests strong cost control relative to sales.

Operational Efficiency and Trends

The trend over 2025 is clearly one of contraction, reflecting lower demand for large agricultural equipment. For instance, the crucial Production and Precision Agriculture segment is projected to have an operating margin between 15.5% and 17.0% for the full year 2025, which is still a fantastic margin but down from prior peak years. The Small Agriculture and Turf segment is expected to see operating margins between 12.0% and 13.5%.

This decline in profitability isn't a failure of cost management, but a reflection of lower sales volume-a 9% drop in net sales and a 26% decline in net income in Q3 2025 compared to the prior year, for example. The company is proactively managing inventory and focusing on cost control to achieve higher margins even at the bottom of the cycle, a key part of their Smart Industrial Operating Model. They're getting leaner to weather the storm.

• Manage inventory proactively to control costs.
• Focus on positive price realization across all segments.
• Leverage cost of sales better for margin improvement.

That's how you maintain double-digit net margins in a down cycle. If you want to dig deeper into who is betting on this resilience, check out Exploring Deere & Company (DE) Investor Profile: Who's Buying and Why?

Debt vs. Equity Structure

You're looking at Deere & Company's (DE) balance sheet and wondering if that debt load is a red flag. Honestly, for a company with a massive financial services arm, the debt structure is less alarming than it looks at first glance, but it still requires a clear-eyed view of their leverage.

As of the July 2025 quarter, Deere & Company carried a substantial total debt of approximately $66.931 billion, with the majority sitting in long-term obligations. This high figure is typical because the Financial Services segment, which offers financing for equipment purchases, uses debt to fund its loan portfolio. That's a different kind of debt risk than borrowing just to build a new factory.

• Long-Term Debt: $44.429 billion (as of Jul. 2025).
• Short-Term Debt: $22.502 billion (as of Jul. 2025).
• Total Stockholders' Equity: $25.175 billion (as of Jul. 2025).

The core measure of financial leverage, the debt-to-equity (D/E) ratio, stood at about 2.66 as of July 2025. Here's the quick math: Total Debt ($66.931 billion) divided by Total Stockholders' Equity ($25.175 billion) equals 2.66. This means for every dollar of equity, the company uses about $2.66 in debt to finance its assets. It's a high ratio, but it's defintely not out of line for the sector.

To be fair, this leverage is actually quite reasonable compared to Deere & Company's historical median of 3.64, and it places the company in the bottom 25% of the Farm & Heavy Construction Machinery industry for D/E. For context, a key competitor like CNH Industrial NV has recently shown a D/E around 3.546, while Caterpillar, Inc. is closer to 2.011. Deere & Company is balancing its need for capital-especially for its lending business-with a relatively conservative approach compared to its own past and some peers.

The company is actively managing its debt profile. Earlier in 2025, Deere & Company issued $2 billion in new unsecured notes, including $1.25 billion at 5.450% due in 2035 and $750 million at 5.700% due in 2055. Plus, the financial arm, John Deere Capital Corp, issued an additional $900 million in senior notes in January 2025, maturing in 2027 and 2028. These issuances show a continued reliance on debt to fuel their operations and finance customer purchases, which is central to their business model. They are clearly using debt financing to support their growth trajectory, which you can see aligns with their strategic direction in the Mission Statement, Vision, & Core Values of Deere & Company (DE).

The balance is achieved by using the debt to generate high-margin interest income through the Financial Services segment, essentially making the debt an asset-generating tool, not just a liability for manufacturing. What this estimate hides is the quality of the loan portfolio backing that debt, but the overall strategy is to use the low cost of investment-grade credit to drive sales. Finance: track the interest coverage ratio on the next quarterly report for any signs of strain by Friday.

Liquidity and Solvency

You want to know if Deere & Company (DE) can cover its short-term bills, and the answer is a clear yes. The company's liquidity position is defintely strong, driven by healthy cash generation from its core equipment operations, even as it manages a cyclical downturn.

We look at two key metrics: the Current Ratio and the Quick Ratio (also called the acid-test ratio). These tell you how easily a company can convert assets into cash to pay off its current liabilities (debts due within a year). For Deere & Company, these numbers are well above the safe 1.0 threshold, signaling a solid buffer.

• Current Ratio (Nov 2025): 2.19
• Quick Ratio (Nov 2025): 1.98

A Current Ratio of 2.19 means Deere & Company has $2.19 in current assets for every dollar of current liabilities. The Quick Ratio of 1.98 is even more telling because it strips out inventory-a crucial step for a heavy machinery manufacturer like Deere & Company. This ratio is significantly better than the Farm & Heavy Construction Machinery industry median of 1.17, showing superior short-term financial strength.

Working Capital and Cash Flow Trends

Working capital-the difference between current assets and current liabilities-is the lifeblood of day-to-day operations. Deere & Company's current working capital sits around $39.33 billion. However, the expectation for August 2025 is a slight decline to about $32.8 billion, which is a trend to watch, but not a panic signal.

The change in working capital for the trailing twelve months (TTM) ending July 2025 was a positive inflow of $564 million, indicating that the net change in operating assets and liabilities contributed cash, a good sign for operating efficiency.

When you map this to the cash flow statements, the picture remains positive, but reflects the current market environment. Here's the quick math on the cash movements for the 2025 fiscal year:

The company is guiding for net operating cash flow between $4.5 billion and $5.5 billion for the fiscal year 2025, which is solid. This cash generation easily covers the projected capital expenditures (CapEx) of $1.4 billion, leaving ample Free Cash Flow (FCF) for shareholders.

Liquidity Strengths and Near-Term Actions

The main strength is the high ratio of quick assets to liabilities. The cash and equivalents position also rose to about $8.6 billion by the third quarter of 2025, which further strengthens the liquidity buffer. This is a business that generates cash reliably, even when sales growth slows.

The only potential concern is the cyclicality inherent in heavy equipment, which can cause inventory and receivables to swell, putting temporary pressure on working capital. But still, the current ratios show an ability to absorb that pressure. The large negative financing cash flow of $-6.018 billion TTM is actually a positive sign of financial discipline, reflecting debt reduction and returning capital to shareholders via dividends and share repurchases.

Your action is clear: Monitor the quarterly OCF against the $4.5 billion to $5.5 billion guidance. If OCF drops below the low end of that range, you'll need to re-evaluate the impact of the agricultural downturn on their core business. You can find more detail on the company's full financial picture in our full analysis: Breaking Down Deere & Company (DE) Financial Health: Key Insights for Investors.

Valuation Analysis

You're looking at Deere & Company (DE) after a period of strong stock performance, but the valuation metrics suggest the market is pricing in significant future growth, which is a key risk. Honesty, the stock is trading at a premium, reflecting its market dominance and technological lead in precision agriculture, but you need to see if that premium is defintely justified by the near-term earnings outlook.

The consensus among analysts is a 'Moderate Buy' or 'Buy'. The average price target sits around $520.05 to $526.83, which implies an upside of about 10% to 11% from the recent closing price of approximately $474.77 as of November 2025. What this estimate hides is the expected earnings per share (EPS) decline for the 2025 fiscal year, which is a major headwind.

Is Deere & Company (DE) Overvalued or Undervalued?

In short, Deere & Company (DE) looks richly valued against its historical averages and the broader industrial sector, but that's typical for a market leader with a clear technology moat. Here's the quick math on the 2025 fiscal year forecasts:

• Price-to-Earnings (P/E) is forecast at 27.4x.
• Price-to-Book (P/B) is forecast at 6.15x.
• Enterprise Value-to-EBITDA (EV/EBITDA) is forecast at 26.6x.

A P/E ratio of 27.4x is high for a cyclical industrial company, especially when 2025 EPS is expected to decline. This valuation multiple signals that investors are looking past the current downturn in the agricultural cycle, essentially betting on a strong rebound in 2026 and beyond, driven by their high-margin technology segments.

Stock Performance and Dividend Health

Over the last 12 months, the stock has shown resilience, rallying approximately 22.1%. Still, the price action has been volatile. The 52-week trading range shows the stock's high was $533.78, while the low was $403.01. This wide range reflects the market's ongoing debate about the timing and strength of the next equipment cycle.

On the income side, the dividend remains secure and growing. Deere & Company (DE) pays an annual dividend of $6.48 per share. The dividend yield is a modest but respectable 1.37%. More importantly, the payout ratio is sustainable, sitting around 32.36% to 34% of earnings. A low payout ratio means the dividend is safe, plus the company retains ample cash to reinvest in its technology or weather a deeper downturn.

For a detailed breakdown of the fundamental drivers behind these numbers, you should read the full post: Breaking Down Deere & Company (DE) Financial Health: Key Insights for Investors.

Action: Re-evaluate your entry point if the stock price approaches the 52-week high of $533.78, as the current valuation already prices in a lot of good news.

Risk Factors

You're looking at Deere & Company (DE) and seeing a strong long-term technology story, but the near-term cyclical risks are defintely real and demand your attention. The core challenge for fiscal year 2025 isn't execution; it's a severe market contraction that's hitting their top line, which is why the company narrowed its full-year net income forecast to a range of $4.75 billion to $5.25 billion, down significantly from the $7.1 billion reported in 2024.

External and Market Headwinds

The primary external risk is the cyclical downturn in the agricultural equipment market, driven by cautious customer sentiment and a normalization of net farm income. This is a classic cyclical risk, but the magnitude is notable. For North America, the company projects Large Ag equipment sales to decline by approximately 30%. This market-wide softening is coupled with high interest rates, which directly impact the customer's ability to finance new purchases, plus there's still a high level of used equipment inventory in the market that needs to clear out.

Here's the quick math on the segment outlook:

• Production & Precision Ag: Net sales expected down 15%-20%.
• Small Ag & Turf: Net sales expected down around 10%.
• Construction & Forestry: Net sales projected down 10%-15%.

The market is contracting, so volume is the biggest headwind.

Operational and Financial Risks

The biggest financial risk the company has highlighted is the ongoing trade friction, specifically the impact of tariffs. Deere & Company forecasts a substantial tariff expense of nearly $600 million for the full fiscal year 2025. To be fair, they are managing this, but it's a direct cost drag on margins. Also, the drop in sales volume translates directly into operational risk; in the third quarter of 2025 alone, negative volume and product mix were the primary factors, accounting for a $494 million reduction in operating profit for the Production and Precision Agriculture segment. This is the cost of operating in a trough cycle.

Mitigation Strategies and Clear Actions

The good news is that management has been proactive, which is a sign of a best-in-class operator. Their core mitigation strategy has been disciplined underproduction to manage dealer inventory, positioning them for a quicker rebound when the cycle turns. For example, they've cut Large Ag field inventory by 25% year-over-year. They are also strategically pivoting to reduce geopolitical risk by localizing production, aiming to source 80% of raw materials domestically by the end of 2025, which should slash tariff exposure by 40% by 2026.

The long-term play is their strategic focus on Precision Agriculture (Precision Ag) and technology, which allows them to capture positive price realization even in a down market. Precision Ag is a high-margin business, with revenues expected to reach around $5 billion this year. This is the structural improvement that should allow them to achieve higher margins at trough levels compared to previous cycles. If you want to dive deeper into who is betting on this long-term view, you should check out Exploring Deere & Company (DE) Investor Profile: Who's Buying and Why?

Growth Opportunities

You're looking at Deere & Company (DE) right now, and the headline numbers for fiscal year 2025 show a clear market contraction-that's the near-term risk. But as a long-term investor, you need to look past the cyclical downturn and focus on the structural growth drivers. Honestly, the company is not just selling tractors anymore; it's selling a high-margin, data-driven service.

The core of Deere & Company's future growth is its Smart Industrial Strategy, which is all about delivering intelligent, connected machines and solutions. This pivot positions them to capitalize on the inevitable trend toward precision agriculture (Ag) and smart farming. They are defintely building an unparalleled competitive moat in Ag technology, which is hard for competitors to replicate. This is a classic shift from a one-time equipment sale to a recurring revenue model.

Here's the quick math on the current outlook and the long-term opportunity. The company has adjusted its full-year 2025 net income forecast to a range of $4.75 billion to $5.50 billion, reflecting significant market headwinds like a projected 30% decline in North American Large Ag equipment sales. Still, analysts project earnings per share (EPS) for the following fiscal year to rise, with estimates ranging from $19.12 to $21.08, showing confidence in the recovery and their technology-driven strategy. The key is their massive R&D investment, which remains robust at approximately $2.267 billion.

The future revenue growth isn't coming from simply selling more iron; it's coming from the data and software that makes the iron smarter. Their competitive advantages are clear:

• Precision Ag Leadership: Scaling technologies like the autonomous 8R Tractor and the See & Spray™ spot spraying solution.
• Global Dealer Network: An extensive network of over 1,800 to 2,000+ locations globally provides a service and parts advantage that locks customers into the ecosystem.
• Financial Services: The John Deere Financial segment facilitates equipment sales and provides a resilient, growing revenue stream, reporting finance and interest income of $1,453 million in the first quarter of 2025.

To be fair, the company is actively expanding its footprint in high-growth regions like South America, particularly Brazil and Argentina, and also in India, targeting double-digit unit growth off a smaller base. Plus, their 2025 Startup Collaborator program, which selected six innovative companies, is a clear sign they are buying or partnering for the next wave of technology-things like 4D LiDAR and digital twin analytics-to maintain their edge.

What this estimate hides is the long-term value of their goal to achieve 10% recurring revenue from connected services by 2030. That's a fundamental shift in business model resilience. You can find more detail on their long-term vision in the Mission Statement, Vision, & Core Values of Deere & Company (DE).

Here's a snapshot of the forward-looking segment sales projections for the equipment operations, which shows where the near-term pain is, but also the relative resilience of the Construction & Forestry segment.

Your action here is simple: look past the 2025 cyclical dip. The company is actively investing in the technology that will drive higher-margin, recurring revenue for the next decade. The current market weakness is simply a price-of-entry opportunity for a business with a clear, tech-driven future.