Deere & Company (DE) Q3 FY2026 earnings call

Summary

Strongest causal claim (Kovar, prepared): North America planter+sprayer early-order programs are already mid-single-digit above last year's completed program while still open — "an encouraging signal that reinforces our view that 2026 represents the bottom of the agricultural equipment cycle." Recovery is "measured rather than a sharp rebound in 2027." South America still cites fertilizer expenses + rates as the equipment-affordability squeeze (the farm-income-squeeze-to-ag-equipment-downcycle forcing function, first-party).

Headline: NI $1.379B / $5.10; equipment ops sales +6% to $11.0B, margin 14.4%. PPA sales −6% ($3.998B), FY PPA now −10% / OM 11–12%. Small Ag & Turf +12% / OM raised 14.5–15.5%. C&F +18% on data-center, infrastructure, pipeline; backlogs "well into FY2027." FY NI raised $4.75–5.00B; FCF $5.0–5.5B. Direct tariff expense ~$1.1B; IEEPA refunds $382M YTD, no more assumed.

Dated catalysts: Sprayer EOP closes end-August; planter EOP closes end-September; combine EOP just opened — next update on the Q4 call. Large-ag US/Canada industry still −15 to −20%.

Transcript

Operator:

Good morning, and welcome to Deere & Company third quarter earnings conference call. Your lines have been placed in listen only until the question and answer session of today's conference. I would now like to turn the call over to Mr. Chris Seibert, Director of Investor Relations. Thank you. You may begin.

Chris Seibert:

Hello. Welcome, and thank you for joining us on today's call. Joining me on the call today are Brent Norwood, Chief Financial Officer, Deanna Kovar, President, Worldwide Agriculture & Turf Division, Production & Precision Ag, Sales and Marketing, Regions of the Americas and Australia, and Dan Pooley, Manager, Investor Communications. Today, we'll take a closer look at Deere's third quarter earnings, then spend some time talking about our end markets and our current outlook for fiscal 2026. After that, we'll respond to your questions. Please note that slides are available to complement the call this morning. They can be accessed on our website at johndeere.com/earnings. First, a reminder, this call is broadcast live on the internet and recorded for future transmission and use by Deere & Company. Any other use, recording, or transmission of any portion of this copyrighted broadcast without the express written consent of Deere is strictly prohibited.

Dan Pooley:

Good morning, and thank you for joining us. John Deere delivered a strong third quarter, with equipment operations achieving 14.4% operating margin. While conditions vary across our end markets, we continue to see pockets of strength. In agriculture, producers remain focused on managing profitability, impacted by fluctuating commodity fundamentals and uncertainty around input costs and crop demand, all of which are influencing capital spending decisions by region. At the same time, construction, compact construction, and turf markets remain supported by healthy project activity and steady demand fundamentals, reinforcing the value of Deere's diversified portfolio. Against this backdrop, Deere's performance continues to underscore the strength of our operating model across our factories, warehouses, and offices. Teams executed well throughout the quarter, delivering strong performance while maintaining cost discipline. We also made continued progress improving inventory health, positioning Deere, our dealers, and our customers to respond effectively as market conditions evolve.

Chris Seibert:

Absolutely, Dan. This quarter's result reflects strong execution across all business segments amid a dynamic market and evolving operating environment. Our factories performed exceptionally well and exceeded expectations on production output, combined with disciplined execution across the business and favorable price realization. This strong operational performance drove results above company and consensus expectations for both revenue and profitability. The quarter also included multiple tariff-related developments. We recognized $110 million of incremental refunds in Q3, slightly above expectations due to the timing of the Phase 2 IEPA refund approvals. As a result, total refunds recognized in fiscal year 2026 now stand at $382 million. Notably, our current outlook assumes no further refund activity during the balance of the fiscal year.

Brent Norwood:

This is Brent. I just had one more point on the outlook. I remain very confident in our team's ability to finish strong for the fiscal year. The combination of our performance year-to-date and a strong fourth quarter order book across all segments has enabled us to narrow our guidance ranges and improve our net income and cash flow forecast despite a very dynamic market backdrop.

Dan Pooley:

Thanks for the additional details, both Brent and Chris. Building on that, we had a few adjustments in the guidance ranges. Can you help walk us through the rationale, starting with C&F?

Chris Seibert:

Sure. For C&F, we maintained our sales guidance of approximately 20% year-over-year growth, and we narrowed our full-year margin guidance to between 10.5%-11.5%, reflecting continued confidence in the business and the outlook for the remainder of this year. The order books for 2026 are largely full as demand fundamentals remain favorable across both the earthmoving and road building end markets. Large-scale infrastructure projects, data center construction, and pipeline activity continue to support robust customer demand. As a result, customer backlogs now extend well into fiscal year 2027, providing healthy visibility and optimism for next year, and support our increased 2026 industry guide for construction equipment to be up 5%-10%. While we have increased production rates across our construction factories, continued order strength and retail momentum now have us producing modestly below retail demand.

Brent Norwood:

This is Brent. I would add one final perspective on Construction & Forestry. Chris highlighted the strong growth opportunity we are seeing in both our precision construction technologies and our construction portfolio. As we think about our Leap Ambitions, C&F represents one of the most significant opportunities across Deere, both from a growth standpoint and in terms of the value we can create for customers. Across both agriculture and construction, labor remains constrained and customers increasingly rely on technology to do more with less. Deere has a long track record of addressing those challenges in agriculture, and we are seeing similar momentum in construction now. Whether through technology adoption, expansion of our digital ecosystem with solutions like Tenna, or growth of our equipment portfolio, we see a strong runway ahead.

Dan Pooley:

Thanks, Brent. Chris, can you now walk us through the Small Ag & Turf business?

Chris Seibert:

Yes. While market conditions within Small Ag & Turf vary by end customer and geography, the overall demand environment remains positive and consistent with our expectations, with order books that support the remaining sales outlook for 2026. Our dairy and livestock customers experienced exceptionally strong farm cash flows in 2025 and have been able to maintain healthy margins in 2026, supported by strong beef prices. As a result, they continue to invest selectively in productivity-enhancing equipment and solutions that improve operating efficiency and support long-term profitability. In Turf, we continue to see encouraging trends across both our residential and commercial mowing markets. Demand in these categories has improved year-over-year as the industry progresses toward more normalized levels following several years of inventory and demand adjustments.

Brent Norwood:

Before we move on, I'd like to take a moment to recognize the Small Ag & Turf team. The strong results delivered so far this year are the outcome of exceptional execution across the organization. From managing costs and production to supporting our customers and dealers, the team has consistently performed at a high level.

Dan Pooley:

Thank you, Chris and Brent. Shifting now to Production & Precision Ag. Deanna, could you share your perspective on the business in the current market environment?

Deanna Kovar:

Of course, Dan. Within Production & Precision Ag this quarter, we have seen softer demand conditions in both South America and Europe while North America has remained stable. Despite those regional differences, overall demand has evolved largely in line with our expectations, and our order books are now effectively full for the year. As we move through the remainder of 2026, our focus is on executing to our production plans, delivering for our customers, and continuing the disciplined management of the business. Let me now break down the dynamics we're seeing across each of our key markets. I'll start with South America, which remains a challenged region in the near term. Farmers continue to contend with elevated production costs, particularly fertilizer expenses, as well as a higher interest rate environment that has weighed on equipment affordability and purchasing activity.

Chris Seibert:

Sure, Deanna. Given the softer demand expectations in South America and Europe, we have adjusted our full-year sales outlook to be down approximately 10%. At the same time, we have tightened our margin guidance to 11%-12%, reflecting the revised sales outlook while continuing to demonstrate the resilience of our earnings. Our ability to generate healthy margins, even at subtropical demand levels, allows us to continue investing consistently through the cycle.

Dan Pooley:

Thank you for all that great color. Let us shift to our model year 2027 early order programs in North America. Deanna, can you give us an update on the progress of those order programs?

Deanna Kovar:

Sure, Dan. Let's begin with where we are with regards to timing. The early order program for sprayers opened in mid-May and is still running through the end of this month. Planters opened at the beginning of June and will close at the end of September, while our combine program just opened. As of right now, we are seeing modest improvements in order intake versus the prior year. Even though the crop care programs are still open, the collective orders for planters and sprayers are already higher than last year. At this time, results are up mid-single digits compared to the completion of last year's program. We will provide an update next quarter after they have both closed. Overall, we view the early order program results as an encouraging signal that reinforces our view that 2026 represents the bottom of the agricultural equipment cycle.

Dan Pooley:

Thanks, Deanna. You cited healthier dealer inventories as a key building block for recovery. Can you expand on that?

Deanna Kovar:

Throughout this downturn, we have remained highly disciplined in balancing production with demand to support channel health. Those proactive decisions have resulted in meaningful improvements across equipment inventories. Within North America, new inventories remain tight and well-positioned to support customer demand, while late-model used inventory continues to improve. The model-year distribution of used Combines is now in a healthy position, and model-year 2023 and 2024 high horsepower Tractors are down nearly 40% from a year ago. Just as importantly, the spread between new and used equipment values has largely normalized, improving replacement economics and creating a healthier environment for equipment trade cycles. Taken together, these trends reinforce the progress made across the channel and leave Deere, our dealers, and our customers better positioned for the next phase of the cycle.

Dan Pooley:

Thanks for the additional perspective. Let's pivot to precision ag technology. Can you talk to us about how customers are using our solutions this season and what we are seeing in adoption trends?

Deanna Kovar:

We continue investing through the cycle in technologies that improve customer profitability across market conditions with a focus on lowering costs, increasing productivity, and maximizing yields. Utilization and adoption continue to reinforce the value we bring with our precision technology portfolio. It also shows the importance of staying committed, particularly in a challenging farm economy. Customers are using See & Spray on significantly more acres year over year while achieving more than 50% herbicide savings. At the same time, current EOP trends suggest factory adoption of See & Spray will nearly double, with the technology included on about one-third of North American sprayers on order. We also see strong momentum and consistent adoption patterns in our next generation of Planter technologies. You'll remember that we launched our industry-leading ExactEmerge Planters over a decade ago and are seeing continued pull for this technology.

Dan Pooley:

Thanks, Deanna. Brent, before we open the line for questions, would you share a few closing thoughts?

Brent Norwood:

Yeah. Thanks, Dan. To wrap up, I want to take a step back and highlight where we are today, how the business is positioned, and why we remain confident in the opportunities ahead. As we discussed, the agricultural environment remains challenging, but we continue to believe that 2026 represents the bottom of the ag equipment cycle. While the recovery is likely to be measured and is expected to vary by region, the underlying trends are moving in the right direction. I also want to recognize the proactive and disciplined actions taken by our employees and our dealers throughout this downturn. Of particular note are the actions taken around inventory management. Those actions have strengthened channel health and better position Deere, our dealers, and our customers for the recovery ahead. At the same time, the benefits of Deere's diversified portfolio remain clear.

Dan Pooley:

Thanks, Brent. We will now open the line for analyst questions.

Chris Seibert:

Now we are ready to begin the Q&A portion of the call. The operator will instruct you on the polling procedure. In consideration of others, and to allow more of you to participate in the call, please limit yourself to one question. If you have additional questions, we ask that you rejoin the queue.

Operator:

Thank you. If you would like to ask a question, please press star one. If you need to withdraw, press star two. Our first question comes from Jamie Cook from Truist Securities. Your line is open.

Jamie Cook:

Hi, good morning, and congrats on a nice quarter. I guess just my first question, just on the setup for 2027, how are we thinking about production versus retail by region? Just with regards to the early order program up mid-single digit, can you just talk about what the pricing expectations are just in 2027, just given concerns about inflationary costs over the past several years on farm equipment? Thank you.

Chris Seibert:

Hey, Jamie. This is Chris. Thanks for the question. Maybe I start first with the production to retail type environment. You heard us talk about, specifically for PPA now and for Construction & Forestry, modest underproduction this year. Call it a couple percentage points for each of these segments. The drivers there, certainly our shipping plans are set for the full year, and the changes we have seen in South America just drive a little more caution for us in that market. On the Construction & Forestry side of things, the continuous pace and growth in retails, and given where we are with our order position being four to five months out, basically lead to a minor level of underproduction in 2026.

Deanna Kovar:

Yeah, this is Deanna. From an EOP pricing standpoint, we of course rolled that pricing out several months ago as we started our EOP process, and our focus remains on covering inflation with our pricing, and we've done that across the EOP products and also across all of the PPA portfolio as we roll towards 2027.

Chris Seibert:

Thanks for the question, Jamie.

Operator:

Our next question comes from Tami Zakaria from J.P. Morgan. Your line is open.

Tami Zakaria:

Hey, good morning. Thank you so much. A question on tariffs. I wanted to clarify. I think you expect now $1.1 billion of impact, which I think is probably $100 million lower than what you had anticipated originally. Is that a function of the tariff relief that Ag Equipment got back in July, or is that reflective of some refunds you expect? Can you help us understand what's driving that tariff expectation change?

Chris Seibert:

Yeah, Tami, I can take a shot at that. Yeah, so the numbers you mentioned, previously, we communicated an annual run rate for fiscal year 2026 of $1.2 billion. That has been updated to $1.1 billion. That excludes any of the positive impacts we have seen from refunds. The driver from $1.2 billion to $1.1 billion is mainly attributed to the changes in Section 232 tariffs. Remember, previously on imported goods, we had a tariff rate of roughly 25%. That kind of dropped to 15%, and given our imports from Europe specifically, that drove that change for the year. Keep in mind, these changes have been effective June 1. So the impact we see for this year are 5 out of 12 months. You can expect another, call it tailwind for fiscal year 2027 as a result of these changes. Thanks for the question.

Tami Zakaria:

Understood. Thank you. My second question is on your expectation for the excavator launch. I know it was going to launch, so could you give us some updates on how that's trending and what you're seeing in terms of when the broader adoption would happen?

Brent Norwood:

Hey, Tammy. This is Brent. With respect to the excavator launch, we did launch the first models of our excavator, our Deere-designed excavator, earlier this spring, and we're really just in the process of getting those shipments out and getting those into the hands of customers. I think we've got three models in the market today. The feedback we've gotten to date has been very positive, so we're really excited about the impact that we'll continue to have in 2027. Keep in mind, our excavator portfolio has a number of models in it that we will begin to roll out, again, starting this spring through the next three to four years. We're just early days in the release of the Deere-designed excavators.

Operator:

Our next question comes from Kristen Owen from Oppenheimer. Your line is open.

Kristen Owen:

Hi. Good morning. Thank you for the question. Just wanted to follow up on some of the inventory comments and your comments for 2027. I am looking here 3Q, 4Q. I am just wondering, did something slip between those quarters, maybe pushed a little bit into 3Q from 4Q? When I look at your inventory to sales ratios, it looks like you actually built some tractor inventory in 3Q ahead of the industry. Is that because the demand signals that you are seeing, is that being offset by you in South America? Just want to understand some of that cadence exiting the year. Thank you.

Chris Seibert:

Hey, Kristen, this is Chris. I would not read too much into the recent changes here in Q3. Our shipment plans have been largely set for the full year, and we have the orders on hand. As you have seen this quarter specifically, we pulled ahead some demand to kind of manage some risk here in Q4, but nothing in particular on the inventory side of things you need to be concerned about. Deanna, anything you would add here?

Deanna Kovar:

Yeah. Our factories continue to deliver and hit the forecasts. On top of that, as we look at our sold ahead positions and our retail pace across the Americas, we continue to be on trend with historical averages and have high expectations that we will be able to move through that inventory as expected. If you remember, in North America, we slowly entered 2027 relative to tractor shipments, and so we are making up time, but our retail activity hasn't missed that pace at all.

Brent Norwood:

Hey, Kristen, this is Brent. Just as you think about the 3Q, 4Q bridge, maybe a couple of notes. For PPA and C&F, we would expect a similar net sales level in the fourth quarter as we saw in the third quarter. Keep in mind, from a margin perspective, we won't get the benefit of refunds in the fourth quarter like we had in the third quarter. And then specifically for PPA and SAT, both of those divisions typically have a seasonal high of R&D and SA&G that hit in the fourth quarter. As you think about bridging 3Q to 4Q, again, net sales is going to be more or less the same for PPA and C&F. But margins will come in a little bit on PPA and SAT as they incur a slightly higher load of R&D and SA&G coming out of the year. Thanks for the question, Kristen.

Operator:

Our next question comes from Tim Thein from Raymond James. Your line is open.

Tim Thein:

Thank you. Thanks. Good morning. My question is just on the role that mix could potentially play in thinking about in 2027. Obviously, there are a number of things that go into that, and I assume you want to stay away from the forecasting the different geographic or how the markets play out geographically. But in the comments alluded to technology, both on the C&F side and then obviously the strong underlying contribution in the spring early order program in terms of the take rates on some of those precision offerings.

Chris Seibert:

Maybe when we talk about mix first, I think we need to recognize the industry environment we are in right now. There is still some uncertainty out there. You think about agriculture, obviously the volatility we have seen in inputs and commodities is driving some caution there, but also some shipment disruptions. You think about the Black Sea and other things. We continue to focus on controllables here, inventory, management. Deanna made these comments. We feel pretty good about that. And certainly, if you think about other kind of movers here, the recent softness in the E.U. and Brazil, we need to see how that kind of plays into 2027. I think it is too early to tell, as you know, specifically in South America. Things can turn quickly. Construction, we see good fundamentals there. But obviously, depending on the growth there, that could have a mix impact too.

Operator:

Our next question comes from Jerry Revich from Wells Fargo. Your line is open.

Jerry Revich:

Yes. Hi, good morning, everyone. I wonder if you could just unpack the comments on the early order program. Deanna, if you wouldn't mind just commenting on what variability in demand you saw depending on region, because it came in, I think, better than most of us expected it in aggregate. As the early order program eventually winds down, the mid-single-digit growth that you're seeing now, I guess based on progress, would suggest you could wind up in the high single-digit range. Can you just comment on the moving pieces there, if you don't mind, around those two items? Thanks.

Deanna Kovar:

Yeah. Thanks, Jerry. Appreciate the question. I think dynamic is certainly a part of this as we're still in the middle of these early order programs with a couple of weeks to go on our sprayer early order program and then a little bit longer on our planter EOP. I would say, as we look regionally, the U.S. is trending slightly better than Canada. Remember, in these products, especially planters, Canada is a very limited part of our portfolio. We continue to see solid expectations from our customers that they want the latest and greatest technologies in planting and spraying. I think some of the best signals that we're seeing is, of course, an increase. We're talking mid-single digit. Time will tell whether that turns even more positive as we close out the EOP.

Chris Seibert:

Thanks for the question, Jerry.

Operator:

Our next question comes from David Raso from Evercore ISI. Your line is open.

David Raso:

Hi, thank you. I'm curious on the EOP programs. Given the books have been open for a little while, especially sprayers and then planters opened up not too long afterwards, the cadence of the orders being up mid-single digit. I'm just curious, was there anything you can note around has it been maybe some of the recent improvement in grain prices? Was it maybe decisions people were making on technology that the orders were actually up a month and a half ago? Just curious what you're seeing on that cadence.

Deanna Kovar:

Yeah. Thanks, David. From a cadence perspective, I wouldn't read much into it. I think we've seen as expected cadence. We've made some tweaks to our early order program this year to give dealers more choice as they go through, and they've come through as expected. I think, again, we're pleasantly surprised with the technology take rates. And of course, we're hopeful that the mid-single digit increase extends well into the year.

David Raso:

Thank you.

Operator:

Our next question comes from Rob Wertheimer from Melius Research. Your line is open.

Rob Wertheimer:

Thank you. I had two, and I will just ask them both at once. Any comments on the 8 Series tractor orders? Is that kind of falling in line with early order programs trending a little bit better, especially in North America? Deanna, I am not really sure how to think about Europe. The farmer economy is experiencing lots of heat stress and input cost stress, lots of different things. In North America, it seems like if you get a commodity price response, that outweighs everything. Europe is a bit more diverse. So I wonder if you could comment on anything you can on whether crop prices are starting to reflect some of the stress they are feeling. Whether you expect Europe to react similarly to the U.S. if we do get a crop price response. Thank you.

Chris Seibert:

Yeah. Thanks for the question, Rob. I would say if we kind of quickly walk around some of the geography and starting with your questions in on 8R. I would say, 8R orders right now are as expected. Keep in mind, we have orders kind of being 4-5 months out. Our model year 2026 shipment schedule is basically closed. So we are kind of collecting orders here for the first quarter. I think we are encouraged by the recent changes and development in commodity prices specifically. If you look today, we are talking corn futures about $5.05, which is definitely, call it a good signal for a lot of these growers out there. In other geographies, you touched on Europe a little bit and Brazil. In Brazil, we typically take a 3-month order book, kind of to manage the volatility in that market.

Operator:

Our next question comes from Stephen Volkmann from Jefferies. Your line is open.

Steve Volkmann:

Great. Good morning, guys. Maybe switching back over to C&F. I'm curious, you sort of put some bookend numbers around the early order program on Ag. Any sense of how the C&F programs are shaping up? And if you can just add in any more granularity about how much of that you think is dealer rental fleet loading and the outlook for that theme. Thank you.

Chris Seibert:

Hey, Steve, this is Chris. For Construction & Forestry, order trends have been very positive. We have about four to five months of orders on hand, which is quite frankly, a little more than we would want to have. Typically, talk about two to three months. But yeah, industry has been growing. Retails have been growing, and that basically supported our order bank here positively. I would say if we think about the drivers, certainly large infrastructure projects and data center starts and our participation in the independent rental channel as well, since we kind of work with these players in there. But also the opportunity we have on dealer-owned rental fleet. I think that's all driving momentum. As we enter 2027, keep in mind, I talked about that setup for the under production. So that'll give us a little bit of an opportunity as well.

Operator:

Our next question comes from Steven Fisher from UBS. Your line is open.

Steve Fisher:

Oh, great. Thanks. Congrats on the good execution in a challenging environment. Just maybe to clarify the tariff dynamics. You mentioned there's still some benefit from 232 to come in 2027, because it was only really kind of a half year of benefit this year, and sounds like you have no other refunds embedded in Q4.

Brent Norwood:

Hey, Steve, this is Brent. As you think about our tariff expense this year versus next year, net tariffs, so direct tariffs paid less any refunds, will be a headwind going into next year. We'll end up paying about $1.1 billion in direct tariffs this year, less $382 million of refunds. So our net tariff exposure this year is approximately $750-ish. Going into next year, we would expect a run rate that is going to be closer to right around $1 billion for the year. So there will be a bit of a step up in our tariff expense next year as we compare to this year.

Steve Fisher:

Thank you very much.

Brent Norwood:

Thanks, Steve.

Operator:

Our next question comes from Chad Dillard from Bernstein. Your line is open.

Chad Dillard:

Hey, good morning, everyone. A couple quick questions for you on the C&F. First of all, just on pricing. Looks like the guidance implies a 50 basis point positive price versus +8% in the third quarter. I just want to understand some of the moving dynamics behind that. The second question is maybe a bigger picture one on rental and then talking about Deere's dealer rental aspirations. I guess, are you guys thinking about the size you want to grow? Then maybe just give a rough sense for how you're thinking that that changes the economics of the business.

Chris Seibert:

Yeah, Chad, you were cutting out a little bit, but I think your first part of the question was related to pricing in C&F and what we expect. Maybe to give you a little bit of a run up there. We started the year with 2.5%, then basically with 3%, then we kind of rounded it down to 2.5%. Now we're back up at full year guide. The quarter came in pretty good at 8%. There was, quite frankly, one part was an easy comps compared to last year. Keep in mind, Q3 in 2025, we had about 5% negative price in C&F, which was the result of some of the incentives we deployed in the market, given the competitive environment at that point. So pretty good quarter there, but I think in Q4, you've seen the guide.

Brent Norwood:

Hey, Chad, with respect to rental, we think there is an opportunity to further increase our exposure there. We participate both through our sales to the independent rental houses, but also our dealers participate in that market as well. We've seen rental just grow as a percentage of the overall earthmoving business. Today, anywhere from 30%-35% of earthmoving transactions start as a rental. We continue to see that grow. So in part, our dealer-owned rental fleets have grown just as the market has grown. And then on top of that, we've also seen an increased appetite for some of them to invest in expanding their rental fleet and serving their customers even more in that space. We think there's a meaningful opportunity to come, and it could help boost a little bit of the inventory fill that's to happen next year. We'll wait and see to see how that progresses going into 2027. Thanks, Chad.

Chad Dillard:

Thank you.

Operator:

Our next question comes from Angel Castillo from Morgan Stanley. Your line is open.

Angel Castillo:

Hi, thanks for taking my question. I just wanted to go back to the EOPs. I think there was a comment about pricing covering inflation, and I guess I'm trying to understand, first, could you comment on any merchandising incentives you might be doing, and just what is the implication of that and any kind of pricing trends that you're seeing in your EOPs on margins as we go into next year? Just meaning all else equal, I guess, is your backlog implying margins up, down, neutral, any kind of directional commentary there? Then maybe a little bit of a bigger picture question.

Chris Seibert:

Angel, I start. Thanks for the question related to EOP pricing. There are two components of that, right? One, overall we are taking inflationary price in a very challenging environment right now for many of our producers. We are taking a measured approach there. We are committed to cover inflation here over time. Nothing outsized there from a pricing perspective. Keep in mind, we have several points in time in the year where we take pricing, whether it is a tractor order book, whether it is our combined EOP. It is a composition of a few different decision points during the year. The inflationary environment, I think I do not need to tell you that it is dynamic right now. You think about oil prices, how they move and what that means. Also from a tariff perspective, suppliers are experiencing tariffs too.

Brent Norwood:

Angel, hey, this is Brent. As it relates to our lifecycle solutions business, what I would say is, first and foremost, John Deere has always supported our customers' ability to repair their own equipment for themselves or use whatever third party they trust the most. That has not changed at all. I think the agreement does formalize some of the products and tools that we have and offer to the market that we think are industry-leading.

Operator:

Our next question comes from Mig Dobre from Baird. Your line is open.

Peter Kalemkerian:

Hey, thanks, guys. This is Peter Kalemkarian, and I am for Mig this morning. Thank you for taking my question. I actually have a quick one here on Europe. Given the cap budget policy change that is set to take place in 2028, do you think there is a chance that we see demand being pulled forward here in 2027? Are your dealers maybe giving you any indication that that might be the case? Or perhaps the opposite, where we might actually see farmers delay purchases in Europe until there is some certainty with the new policy in 2028. Just any color on what you are seeing in Europe would be great. If you are willing, and I understand that it is early, to provide any directional forecast for that market in 2027, that would also be great.

Chris Seibert:

Yeah, I think the short answer is probably it is too early to tell right now. I think Europe, the environment over there, yes, there is also some policy movement going on there. But again, we typically have an order book which is 4-5 months out. So kind of just starting collecting orders here for Q1. I talked about the difference in the arable segment and between dairy and livestock producers. So certainly, when it comes to their next year's crop, we need to see where input costs are, how commodity prices continue to trend, and that will probably shape sentiment here for PPA and the arable cost producers in Europe. I think on dairy and livestock, it looks fairly stable right now, so we feel good. But again, too early to tell whether policy impact will pull demand forward or kind of delay it. Thanks for the question though.

Operator:

Our last question comes from Sabahat Khan from RBC Capital Markets. Your line is open.

Sabahat Khan:

Great. Thanks, and good morning. Just a quick one. I guess, just based on the current outlook, what you're seeing in the EOPs, obviously the input costs are a big factor in the farmer decisions. Can we just hear some early commentary on kind of the positioning that Brazilian farmers are taking and what the U.S. farmers are thinking from what you're hearing on how the input costs may trend and that ultimately affecting the crop and their decisions? Anything you're hearing in those two markets? Thanks.

Deanna Kovar:

Yeah. Thanks for the question. Certainly, there is uncertainty around input prices, no matter where in the world you're farming. Certainly, the impact of fertilizer is different for a Brazilian farmer than it is for a U.S. farmer. But I would tell you that markets are reacting and farmers are looking for alternatives. Those alternatives might be in the types of products they're applying, the amount they're applying, or even at the broader scale, how markets are serving through alternative sources. Overall, I would say farmers continue to remain resilient as they think about fertilizer. Not necessarily are we seeing a huge reduction in what farmers are intending to apply, and they're out looking for yield just as much as they were prior to these fertilizer challenges. Certainly, farmers are keeping an open mind and considering how they might book future years.

Chris Seibert:

That is all the time we have. We appreciate everyone's time, and thanks for joining us today.

Operator:

That concludes today's conference. Thank you for participating. You may disconnect at this time.