By Nandan Mandayam
Aug 20 (Reuters) - Deere, the world's largest farm equipment manufacturer, raised its full-year net income forecast on Thursday and posted its first rise in quarterly profit in three years on the back of an AI-driven construction boom and tariff refunds.
The company's shares rose nearly 9% and were on track for their best day in six months.
Rising U.S. government and private infrastructure spending alongside the vast AI-fueled buildout of data centers has lifted demand for construction
equipment, with Deere's construction and forestry segment emerging as its fastest-growing business. Quarterly net sales in the segment rose 18% from a year earlier.
As a result of the robust demand, "customer backlogs now extend well into fiscal year 2027," Chris Seibert, Director, Investor Relations, told analysts.
The boost has helped Deere weather a prolonged lull in demand for its large tractors and combine harvesters amid rising costs for farmers and falling agricultural yields.
Quarterly revenue at its mainstay Production & Precision Agriculture segment dropped 6% from a year earlier, though CEO John C. May said Deere continues "to believe 2026 will mark the bottom of the current ag equipment cycle."
But commodity pricing softness "acts as a hard ceiling on major sales recovery," Third Bridge's Ryan Keeney said.
"Farm economics are still quite pressured and it remains to be seen if peers like AGCO and CNH are going to push discounts and price, which could weaken the already soft environment before a recovery."
Deere's Small Ag & Turf segment — home to low horsepower tractors often used in dairy farming — posted a 12% rise in quarterly net sales, with demand aided by improving milk and beef prices.
The company also recorded a tariff refund of $110 million during the quarter, but expects net tariff costs of about $750 million in 2026 and about $1 billion in 2027, according to finance chief Brent Norwood.
Deere's profit per share came in at $5.10 for the quarter, up from $4.75 per share a year earlier and above analysts' estimates of $4.70 per share, according to data compiled by LSEG.
Total quarterly revenue rose 6% from a year earlier to $11 billion, also beating expectations of $10.73 billion.
The John Deere tractor manufacturer now expects 2026 net income of $4.75 billion to $5 billion, compared with its earlier projection of $4.5 billion to $5 billion. The midpoint of the new forecast is in line with Wall Street expectations.
(Reporting by Nandan Mandayam in Bengaluru; Editing by Jonathan Ananda)
