The Rising Influence of Rising Affluence

[DewDiligence]

DE reports FY3Q25 results—lowers_top-end_of_ FY2025 guidance on tariff headwind:

https://s22.q4cdn.com/253594569/files/doc_financials/2025/q3/DE-3Q25-News-Release.pdf

DE now expects the tariff headwind during FY2025 (ending 10/31/25) of $600M, up from the prior guidance of $500M; $300M of the FY total is expected to be realized during FY4Q25.

Consequently, DE lowered the upper bound of the FY2025 net-income guidance so the new range is $4.75-5.25B (rather than $4.75-5.5B). Based on 271M diluted shares, the new guidance equates to FY2025 GAAP EPS of $17.50-19.40 (down from $25.62 in FY2024 and $34.63 in FY2023).

The 50% US import tariff on steel is a big component of DE’s tariff headwind. The reason DE’s tariff headwind is not even worse than the $600M guidance for FY2025 is that a high proportion of DE’s US equipment sales are manufactured in the US: 79% of finished products, and 76% of components.

DE closed -7% today, but it is still +34% from its 12-month low and is only 10% below its all-time high reached in May (following the DY2Q25 earnings release).

At the current share price ($478.84), the FY2025 guidance equates to a P/E range of ~25-27x. DE has not yet given guidance for FY2026 (starting 11/1/25); however, USDA is forecasting substantially higher farm income in (calendar) 2026 compared to 2025, so investors expect 2025 to mark the bottom of the agriculture cycle. Hence, DE’s forward (FY2026) P/E ratio, based on the current share price, is apt to be considerably lower than the 25-27x range mentioned above.


DE FY3Q25 CC slides:
https://s22.q4cdn.com/253594569/files/doc_financials/2025/q3/DE-3Q25-Earnings-Call-Slides.pdf