Deere (DE) Q1 2026 Earnings Call Transcript

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DATE

Thursday, Feb. 19, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• Chief Financial Officer — Josh Jepsen
• President, Worldwide Construction & Forestry and Power Systems — Brian Campbell
• Manager, Investor Communications — Chris Seibert
• Director, Investor Relations — Josh Beal

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TAKEAWAYS

• Net Sales and Revenue -- $9.6 billion, representing a 13% increase, with equipment operations net sales up 18% to $8.0 billion.
• Net Income -- $656 million, equating to $2.42 per diluted share.
• Operating Margin (Equipment Operations) -- 5.9% for the quarter, with all business segments delivering positive net sales growth.
• Production & Precision Ag (PPA) Net Sales -- $3.2 billion, up 3%, with a 4.4% segment operating margin; year-over-year margin decline attributed to higher tariffs, unfavorable sales mix, and increased warranty expenses.
• PPA Price Realization -- Flat overall; North America positive, offset by greater incentives in South America, and positive currency translation contributing nearly four points.
• Small Ag & Turf (SAT) Net Sales -- Up 24% to $2.2 billion, driven by higher shipment volumes and nearly 2.5 points of positive currency translation; operating margin 9%.
• Construction & Forestry (C&F) Net Sales -- Rose 34% year over year to $2.7 billion; shipment volumes and currency effects cited as primary drivers; operating margin 5.1% with negative pricing just under half a point.
• Financial Services Net Income -- $244 million, primarily due to favorable financing spreads and lower provision for credit losses.
• Order Book Trends -- Notable strengthening in Small Ag & Turf and Construction, with C&F order bank up over 50%, reaching its highest level since May 2024, providing extended visibility.
• Inventory Levels -- North American used inventory for Deere combines 15% below March 2024 peak; high-horsepower tractor units down over 10% from March 2025 peak, with latest model years showing sharp sequential reductions.
• Full-Year Guidance (PPA) -- Net sales projected down 5%-10%; 1.5 points positive price realization and 3 points positive currency expected; operating margin guidance 11%-13%.
• Full-Year Guidance (SAT) -- Net sales expected up about 15%, including 2 points each of price realization and positive currency; operating margin guided to 13.5%-15%.
• Full-Year Guidance (C&F) -- Net sales now projected up 15%, with 2.5 points positive price realization and just over 2 points positive currency; operating margin now guided 9%-11%.
• Global Industry Trends -- Large Ag equipment in U.S./Canada industry expected to decline 15%-20%; Small Ag & Turf demand flat to up 5%; European industry outlook flat to up 5%; South America tractor/combine sales now expected down about 5%.
• Tariff Expenses -- Annual tariff costs projected at $1.2 billion pretax; efforts to mitigate Section 232 tariffs continue, with around half the exposure from UFLPA tariffs.
• Pricing and Cost Management -- Price-cost neutral outlook for the full year, inclusive of $600 million in incremental tariffs; C&F price realization guide reduced by 0.5 point due to backlog build.
• Cash Return to Shareholders -- Nearly $750 million returned through dividends and repurchases during the quarter.
• New Product Launch Initiatives -- Launch of fully Deere-designed, Kernersville-built 20-ton class excavators highlighted as major product release; over 24 launches planned at CONEXPO including six from the Wirtgen Group.
• Strategic Acquisition -- Tenna acquisition completed, expanding John Deere’s digital solutions portfolio for mixed-fleet job site management and workflow automation.
• Net Income and Cash Flow Guidance -- Fiscal 2026 net income outlook raised to $4.5-$5.0 billion; equipment operations cash flow now anticipated at $4.5-$5.5 billion.

SUMMARY

Deere & Company (NYSE:DE) reported double-digit growth in equipment sales and margin outperformance above original forecasts, attributing upside to higher shipment volumes and strengthening order books across key segments. Management confirmed improvements in North American Large Ag order velocity and inventory reductions, citing the current period as the anticipated bottom of the cycle while raising guidance for both net income and segment margins. Strategic priorities include the launch of proprietary excavator models and expanded digital capabilities through the Tenna acquisition, aiming to drive future competitiveness in both construction and ag equipment markets. Fiscal 2026 guidance was meaningfully increased, with price realization, currency gains, and cost controls offsetting headwinds from tariffs and regional mix shifts.

• Operating margins for Production & Precision Ag are projected to sequentially improve due to normalization of geographic sales mix as North America production picks up and segment order books extend through year end.
• Used equipment destocking was significant in both combine and high-horsepower tractor categories, with model year 2022 and 2023 8R tractors down over 40% from the March 2025 peak and over 20% sequentially; this inventory movement has enabled improved replacement demand.
• Management stated, "order bank has risen by over 50% in the past quarter, reaching its highest point since May 2024," reflecting increased contractor confidence and broad-based infrastructure demand in the Construction & Forestry segment.
• High utilization rates were observed for harvest technology options, with "over 60% utilization" of Harvest Settings Automation on combines and nearly 80% take rate for the Ultimate package, supporting rising tech adoption and positioning for potential share gains.

INDUSTRY GLOSSARY

• Price Realization: Net effect of pricing changes, incentives, and discounts, stated as the impact on reported sales versus prior period pricing.
• Order Book: A forward-looking measure of secured customer orders, indicating future production or shipment visibility.
• Early Order Program (EOP): Manufacturer program encouraging customers or dealers to place equipment orders before the primary selling season, used to manage production planning and secure pre-season demand.
• Pool Fund: Dealer incentive program used to support inventory movement or provide sales incentives, often targeted to address channel inventory imbalances.
• UFLPA: Acronym for Uyghur Forced Labor Prevention Act, referring to U.S. import tariff regulations impacting a portion of Deere’s total tariff exposure.

Full Conference Call Transcript

Josh Beal: Hello. Welcome, and thank you for joining us on today's call. Joining me on the call today are Josh Jepsen, Chief Financial Officer; Brian Campbell, President, Worldwide Construction & Forestry and Power Systems; and Chris Seibert, Manager, Investor Communications. Today, we will take a closer look at Deere & Company's first quarter earnings, then spend some time talking about our markets and our current outlook for fiscal 2026. After that, we will respond to your questions.

Operator: Please note that slides are available to complement the call this morning.

Josh Beal: They can be accessed on our website at investors.deere.com. Personal 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. Participants in the call, including the Q&A session, agree that their likeness and remarks in all media may be stored and used as part of the earnings call. This call includes forward-looking statements concerning the company's plans and projections for the future that are subject to uncertainties, risks, changes in circumstances, and other factors that are difficult to predict.

Additional information concerning factors that could cause actual results to differ materially is contained in the company's most recent Form 8-K, risk factors in the annual Form 10-K, as updated by reports filed with the Securities and Exchange Commission. This call also may include financial measures that are not in conformance with accounting generally accepted in the United States of America, GAAP. Additional information concerning these measures, including reconciliations to comparable GAAP measures, is included in the release and posted on our website at investors.deere.com under Quarterly Results and Events. I will now turn the call over to Chris Seibert. Good morning. Thank you for joining us today.

Deere & Company completed the first quarter with a 5.9% operating margin for the equipment operations. Our results reflect the strength and resilience of a diversified portfolio spanning multiple end markets and geographies. All business segments delivered higher net sales year over year, with both Small Ag & Turf and Construction & Forestry top line growing by over 20%. Our results for the quarter exceeded our forecast, driven by shipping volumes that were ahead of our initial plan. Importantly, over the course of the quarter,

Christopher Seibert: we saw continued strengthening of our order books across several product lines, most notably in Small Ag & Turf, as well as Construction. In earthmoving, double-digit year-over-year growth in retail settlements and a growing order bank have prompted us to increase our industry outlooks for both construction and compact construction equipment in North America. In Small Ag, order activity for mid-sized tractors supporting the dairy and livestock production system has remained solid, while order velocity for North American turf equipment and compact utility tractors has increased. Global Large Ag fundamentals, while still challenged, were largely stable over the quarter.

This stability has enabled a modest improvement in our net sales forecast for North American Large Ag this year, as our combined early order program finished better than expected, and large tractor order activity has increased. These improvements have helped us to offset softer projections for the South American ag equipment market in 2026. The developments over the course of the past three months have strengthened our belief that 2026 marks the bottom of the current cycle, as we project mid-single-digit net sales growth for the equipment operations this fiscal year. Slide three starts with the results for the first quarter.

Net sales and revenues were up 13% to $9.611 billion, while net sales for the equipment operations were up 18% to $8.001 billion. Net income attributable to Deere & Company was $656 million, or $2.42 per diluted share. Turning to our individual segments, begin with the Production & Precision Ag business on slide four. Net sales of $3.163 billion were up 3% compared to the first quarter last year, primarily due to positive effects of foreign currency translation. Price realization was roughly flat, price realization in North America was positive, though was offset by additional incentives for the South American market. Currency translation was positive by nearly four points.

Operating profit was $139 million, resulting in a 4.4% operating margin for the segment. The year-over-year decrease was primarily due to higher tariffs, unfavorable sales mix, and higher warranty expenses. Moving on to Small Ag & Turf on slide five. Net sales were up 24%, totaling $2.168 billion in the first quarter because of higher shipment volumes and positive effects of foreign currency translation. Price realization was positive by two points. Currency translation was also positive by just under 2.5 points. Operating profit increased year over year to $196 million, resulting in a 9% operating margin. The increase was primarily due to higher shipment volumes, favorable sales mix, and price realization, partially offset by higher tariffs.

Slide six gives our industry outlook for ag and turf markets globally. We continue to expect the Large Ag equipment industry in the U.S. and Canada to decline 15% to 20% this year. However, we are seeing encouraging developments that should provide stability to this segment in the near term while also improving the setup for return to growth. While global row crop production remained strong, robust demand for commodities and a normalization of trade flows are providing support for prices at current levels, which are above the lows that growers experienced last summer. Additionally, government programs are supporting farmer liquidity in the short term.

Ongoing improvement in the used inventory market is providing a better environment for our machine replacement while the age of the fleet continues to grow. Additionally, proposed government policy actions, including additional support for biofuels, provide potential tailwinds for growth. For Small Ag & Turf in the U.S. and Canada, industry demand estimates remained flat to up 5%. The dairy and livestock sector remains profitable due to strong beef prices, while the turf market is seeing a modest return to growth as that sector normalizes after several years of declines. Moving to Europe, the industry is still projected to be flat to up 5%.

The underlying fundamentals of the ag sector are largely unchanged, with no near-term material impact expected from newly negotiated EU trade agreements or recent declines in milk prices. Interest rates are steady, long-term financing costs are manageable, and the region continues to show resilience across key arable markets. In South America, industry sales of tractors and combines are now expected to be down approximately 5%, driven by the Brazilian market, where subdued commodity prices, high interest rate, and a stronger real are putting pressure on producer margins. Industry sales in Asia are now projected to be flat to down 5%. The Indian market is now expected to only be down slightly from the strong levels seen in 2025.

Next, our segment forecasts begin on slide seven. For Production & Precision Ag, net sales are still forecasted to be down between 5%–10% for the full year. The forecast assumes roughly 1.5 points of positive price realization, and about three points of positive currency translation. For the segment's operating margin, our full year forecast remains between 11%–13%. Slide eight shows our forecast for the Small Ag & Turf segment. We now expect net sales to be up about 15%. This includes two points of positive price realization, as well as two points of positive currency translation. The segment's operating margin guide is now between 13.5%–15%. Shifting now to Construction & Forestry on slide nine.

Net sales for the quarter increased roughly 34% year over year to $2.670 billion due to higher shipment volumes and positive effects of foreign currency translation. Price realization was negative, but just under half a point. Currency translation was positive, about three and a half points. Operating profit of $137 million more than doubled year over year, resulting in a 5.1% operating margin, due primarily to favorable shipment volumes as well as production efficiencies, partially offset by higher tariffs. Slide 10 describes our Construction & Forestry industry outlook. Industry sales for both construction equipment and compact construction equipment in the U.S. and Canada are now expected to be up around 5% year over year.

Construction markets remain solid, supported by U.S. government infrastructure spending, declining interest rates, strong rental demand, and data center construction starts. Our year-to-date retail settlement activity is running ahead of our expectations, and our order books continue to grow. Global forestry markets are still expected to remain flat. Global roadbuilding markets are now expected to be up around 5%, driven by market increases in both North America and Europe. Moving to slide 11. 2026 net sales are now forecast to be up around 15%. Our net sales guidance for the year includes about 2.5 points of positive price realization, and just over two points of positive currency translation.

Our projection for the segment's operating margin also increased, and is now estimated to be between 9%–11%. Now transitioning to our Financial Services operations on slide 12. Worldwide Financial Services net income attributable to Deere & Company in the first quarter was $244 million. The year-over-year increase was mainly due to favorable financing spreads and a lower provision for credit losses, partially offset by favorable special items recorded in the first quarter last year. For fiscal year 2026, our outlook increased to $840 million, primarily driven by lower provision for credit losses. Finally, slide 13 outlines our guidance for net income, effective tax rate, and operating cash flow.

For fiscal year 2026, our updated outlook for net income is now between $4.5 and $5.0 billion. Next, our guidance continues to incorporate an effective tax rate between 25% and 27%. And lastly, projections for cash flow from the equipment operations increased by $500 million at both ends of our range, and is now expected to be between $4.5 and $5.5 billion. This concludes our formal comments. We will now shift to a few topics specific to the quarter. To start, let's review Deere & Company’s results this quarter. Net sales increased by about 18% year over year, and margins were just under 6%.

Although the first quarter had an easier top line compare, given last year's underproduction in Small Ag & Turf and Construction & Forestry, it still performed ahead of our plan. Josh Beal, will you explain what happened this quarter and how it affected our full year outlook?

Josh Beal: Yeah. Absolutely, Chris. Let's start with our expectations for the quarter. Overall, we were projecting double-digit net sales growth in the equipment operations, driven by estimates for over 20% growth in both Small Ag and Construction & Forestry, while Large Ag sales were expected to be flat year over year. Despite the projected net sales increase, we were expecting lower equipment operations operating margin year over year due to incremental tariff expenses and an unfavorable product and regional mix in Large Ag. Across all three business units, we executed ahead of our plan for the quarter, and as a result, our performance reflects better top line and margins than originally forecasted.

Better-than-expected shipment volume was the primary driver of both the top line and margin beat. In PPA, shipments of North America large tractors were ahead of plan, while C&F benefited from higher roadbuilding sales in Europe and North America, as well as ahead-of-planned shipments of both construction and compact construction equipment in North America. On the pricing front, C&F pricing was slightly negative this quarter, although competitive price pressures have started to show signs of easing. The results from the quarter in C&F had a slight impact on the timing of our expected price realization in the segment, and as a result, we have revised our full year forecast down by half a point.

PPA pricing was neutral during the quarter, primarily due to discounts implemented in South America responding to FX movements, as well as targeted field inventory reductions. Our PPA price guidance for the full year remains unchanged, and we still expect positive full year price realization in South America. Foreign exchange was also impactful in the quarter. The U.S. dollar was weaker year over year against several relevant currencies for Deere, particularly the euro and Brazilian real. The translation impacts drove year-over-year net sales gains for all three business units. Transitioning to cost management, excluding tariffs, production costs were lower year over year for all business segments in the first quarter.

This was largely attributable to operational efficiencies from higher production and disciplined overhead spending. Tariffs for the year are still projected at around $1.2 billion, as mitigation on Section 232 steel tariffs and some relief in India have been offset by volume growth. As you mentioned in your opening comments, our full year industry demand outlooks for most markets improved over the course of the quarter. We maintained our net sales guidance for PPA even though South America softened, due to some incremental improvement in North America, and we increased the net sales ranges for SAT and C&F by five points.

That resulted in higher projected margin ranges for Small Ag and C&F, resulting in an increased net income forecast of $4.5 to $5.0 billion. Perfect.

Christopher Seibert: Thanks for that breakdown, Josh. It is encouraging to see that our teams continue to execute, focus on what we can control, while also seeing some pickup in end market demand. Now let's take a moment to talk about the broad ag industry. Since late last year, we have seen several supportive developments in the U.S. market, including the recently announced $12 billion Farm-Bridge assistance program, and renewed purchase commitments for U.S. commodities. Can you add some additional color to what this could mean for U.S. growers?

Josh Beal: Sure, Chris. I'll start by reiterating a couple comments on the global ag economy that you mentioned in your opening. Global crop production remains strong, but so does global demand. At current commodity price levels, producer margins remain pressured in many geographies. Specifically for the U.S., USDA just updated their 2026 forecast for net cash farm income. While 2026 U.S. net cash farm income is forecasted to be up around 3% from 2025, much of this increase is being driven by more government payments. Crop cash receipts are expected to be up slightly this year, but expenses are projected to increase as well. Given this setup, we continue to anticipate a challenging environment for many row crop farmers.

However, as you mentioned, we are starting to see some stability for producers as China has resumed purchasing U.S. soybeans. The recently approved government support program looks to provide some near-term liquidity. Additionally, strong farmland values are keeping debt ratios low, despite the lower margin backdrop. Notably, the U.S. fleet age is high and continues to get older as customers put more hours on their equipment. With the stabilization that we are seeing in U.S. ag fundamentals, along with an improving used market, our expectation is that we will start to see some replacement demand return. This is Josh Jepsen. Maybe one key point to reinforce.

The government payments should continue to mitigate downside risks for farmers' balance sheets, acting as a bridge in an environment where crop cash receipts are under pressure. We believe that future policies around renewable fuels and additional export opportunities should drive demand and provide continued stability.

Christopher Seibert: Great. Thank you both. With the developments over the quarter in North America, it appears that we have moved past peak uncertainty and that the market is stabilizing. Building off that, could you also share an update regarding global ag inventories and order books? Yeah. Definitely.

Josh Beal: Let's start with Large Ag in North America. On the new inventory side, we continue to be in a great position, and hold on to our plan to produce in line with retail demand in fiscal 2026. We also continue to make progress in North American used inventories. We saw a typical seasonal increase in used-year combines during our first quarter, however, current inventory levels for Deere combines remain about 15% below their peak in March 2024, with model year distribution at a normal mix. Year-high horsepower tractor units were down mid-single digits in our first quarter, and have declined by over 10% from their March 2025 peak. Late model mix is improving too.

It is notable that while total Deere high horsepower tractors are down over 10% from March, model year 2022 and model year 2023 8R tractors are down more than 40% in that same time period. Just this past quarter alone, model year 2022 and model year 2023 8Rs were down over 20% sequentially, with model year 2024 8Rs also declining by over 10%. While continued reduction in used tractors remains a focus, we are encouraged by the progress that we are seeing. At the same time, large tractor order velocity for the North American market has picked up, and our rolling order books now provide visibility into the fourth quarter.

We also just recently took our last calls for North American combine orders for the year-end, while we still expect that overall North American Large Ag industry to be down 15% to 20% this year, combines will be down less than that range. Similar to North America, we feel good about our new inventory positions in both Europe and South America. The one exception is combines in Brazil, where we are a bit higher than we want to be. We will underproduce retail for Brazilian combines in our second and third quarter to bring those inventory levels down. Despite being higher than our target, our current inventory-to-sales ratio for combines is still significantly lower than what we see with competitors.

As far as order visibility, European tractor order books are currently four to five months out, while South American orders are full through our second quarter. Turning to Small Ag & Turf in North America, last year's underproduction resulted in healthy beginning inventory levels for this segment that remain in place today. For reference,

Christopher Seibert: current

Josh Beal: new field inventory for both tractor horsepower categories in this segment, the less than 100 horsepower category and the 100 to 220 horsepower category, are each about 40% lower year over year. Our ability to maintain those lower inventory levels reinforces our plan to build in line with retail demand in Small Ag this year. And commitment to that plan has been further supported by strength in order activity in the first quarter. This is Josh Jepsen. Maybe share an additional perspective following Beal's comments. Our channel has consistently worked to reduce used inventory levels, and our deliberate approach to managing production and inventories set us up favorably both this year and into the next.

With growing demand across various other markets and segments, we feel good about how we are positioned to execute for the remainder of 2026.

Christopher Seibert: Thank you both. Now let's move on to Construction & Forestry. Josh Beal, we have already touched on C&F's performance in Q1, but can you please give us an update on the current business environment and outlook for 2026?

Josh Beal: Yeah. Happy to, Chris. Let me start with the current market environment. And, Brian, please jump in with any additional color you might have. As you noted earlier, construction markets are a bright spot and continue to demonstrate resilience, bolstered by U.S. government infrastructure investments, decreasing interest rates, and improved rental demand. Recall that we underproduced retail in 2025, which set us up to produce in line with retail demand this year. We saw strength in our first quarter in retail sales that exceeded our estimates, as settlements of construction and compact construction equipment were both up mid-teens year over year our first quarter.

What is perhaps most encouraging is that our order bank has risen by over 50% in the past quarter, reaching its highest point since May 2024. This provides us with clear visibility into the second half of the fiscal year, allowing the Construction & Forestry team to optimize their production plans accordingly. Overall, we are very encouraged by the momentum that we have seen to start the year. Brian, is there anything you'd like to add?

Christopher Seibert: Absolutely.

Josh Beal: I share your enthusiasm, and I am excited about what is on the horizon for this business. As I mentioned at our recent investor event in New York, there are numerous reasons for my optimism. At a macro level, the world is facing growing urgency to upgrade or replace key infrastructure. Investment in single-family housing, especially across the United States, needs to increase. There is a huge demand to support the required infrastructure for AI investments. To get all this work done,

Christopher Seibert: the industry must boost productivity significantly. With machines doing more work with precision

Josh Beal: and utilizing less resources overall. Meeting these goals require smart machines and data-driven insights to execute tasks and manage job sites efficiently. And we believe we can help customers meet these challenges. We will continue to invest on our side to ensure success.

Christopher Seibert: Hey. Thanks for the recap, Brian. Could you remind us of the investments that we are making to meet those challenges?

Operator: Sure, Chris.

Josh Beal: Let's start with excavators. As we have talked about, we are excited to announce our new Deere-designed 20-ton class excavators at the upcoming CONEXPO show in Las Vegas. We have included additional information in the appendix of the earnings presentation for those interested in more detail. Excavators represent about 40% of the North American construction equipment industry, and these models are the first introduction of fully Deere-designed and Kernersville, North Carolina-built machines to the market.

Christopher Seibert: We packed the new units with easy-to-use,

Josh Beal: productivity-enhancing technology while remaining absolutely focused on and making further improvements in quality and durability. This is the first step in what will be a multiyear launch plan for a complete line of excavators. We could not be more excited about sharing these first models with our customers. The CONEXPO event will feature 24 product launches, including world premieres of equipment from John Deere and six market debuts from the Wirtgen Group. The last several years, our efforts have been heavily focused on excavators.

Christopher Seibert: However,

Josh Beal: we continue to innovate across the product portfolio. From new equipment designs to the latest in precision and job site technology, we have never felt better about our complete product portfolio.

Christopher Seibert: Thank you. Hey. On the digital side, yesterday, we completed the acquisition of Tenna. Could you please provide your insights on this acquisition and discuss how it aligns with the broader C&F business and strategy?

Josh Beal: Yeah. We are incredibly excited about bringing the Tenna team and their capabilities into the John Deere portfolio of businesses. It might help to take a step back and talk through our strategy at a high level in the C&F division. We think about the construction industry and how we want to compete in three different layers: machines, tasks, and job sites. On the machine side, completing our product portfolio of best-in-class earthmoving equipment, both in high-precision machines and those that are more basic, is our focus at that level. Second, we are enhancing the tasks that the machines do individually on the job site through precision technologies like SmartGrade, SmartDetect, and SmartWeigh.

The agreements with the three survey providers to provide a fully integrated grade control experience through our equipment is an example of what we are working on in this area. It is having the capabilities to help contractors and customers optimize their fleets, operations, and job sites. Tenna provides a leading technology platform that automates contractor workflows, gives near real-time insights into equipment operations and maintenance, and enhances visibility, planning, and coordination to boost productivity and cut costs.

Tenna’s leading fleet-based products and services combined with the productivity solutions from Virtual Superintendents, who we acquired a little over a year ago, along with the foundational capabilities we have built through the John Deere Operations Center, give us a unique value proposition to offer customers as they work to optimize their fleets, operations, and job sites. Importantly, Tenna and Virtual Superintendents are and will continue to be brand agnostic, focused on mixed-fleet solutions in step with the reality of the fleets and job sites in the industry.

Christopher Seibert: Thank you, Brian. It sounds like there is a lot to be excited about in the Construction & Forestry segment going forward.

Josh Beal: This is Justin. Maybe one thing in addition to the C&F product releases, I would like to share a quick comment about innovation in our other businesses. At the end of this month, we will be at Commodity Classic in San Antonio, Texas with several major product launches and updates to our advanced technology solutions. And just last week, at the World Ag Expo in California, we showcased several innovations that are helping drive value for our high-value crop producers as well.

Christopher Seibert: Thank you both for your comments. Josh, do you have any final thoughts before we open the line for questions?

Josh Beal: Yes. Thanks, Chris. The first quarter demonstrated great execution from our teams. All business segments operated efficiently and delivered results ahead of plan. At the same time, we saw stabilization and improvement in a variety of our end markets. Our channel maintained focus on inventory management, particularly in North American used equipment. Our financial strength has allowed us to maintain high levels of investment throughout the cycle, which positions us well for future growth, particularly as the cycle inflects. The recent and upcoming product and technology introductions are tangible examples of that outcome, and bolster our confidence in our growth aspirations through the end of the decade and beyond.

Over the quarter, we returned nearly $750 million in cash to shareholders through dividends and share repurchases, demonstrating that strong through-cycle financial performance supports both reinvestment in the business and shareholder return. Finally, I would like to express my sincere appreciation to all members of the Deere team. The commitment and dedication demonstrated by our employees, dealers, and suppliers across every area of the business have been instrumental in maintaining this high level of discipline. The Deere team is committed to executing our strategy, and focused on solving our customers' biggest challenges.

Christopher Seibert: Thanks, Josh. Now we will open for questions.

Josh Beal: Now 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 1. If you need to withdraw your question, press 2. Our first question comes from Kristen Owen from Oppenheimer. Hi, good morning. Thank you for taking the question. And just briefly, Josh Jepsen, thank you so much for all the help over the years. If I could start maybe with a pricing question. You gave some helpful commentary on PPA pricing. But I am just wondering how we should think about the bridge from here at neutral in Q1 to the full year guide of 1.5%. And similarly, if you could help us, you trimmed your expectation on C&F.

Can you just maybe walk us through what you are seeing on the pricing side there? Thank you so much.

Josh Beal: Yes. Thanks, Kristen. Happy to. Starting with Large Ag, the first quarter, we mentioned, we did put some incremental incentives in place—sorry. Be back. We go. We put some incremental incentives in place in South America. As we mentioned, we have seen a little bit of a slowdown in that market, and as a result, we are going to pull down inventory a little bit in that market, just in combines. And then maybe just for perspective too on the combine inventory, while we come up a little bit in Q1, we are still about half of the levels on combines that we saw that we peaked at in 2023.

So still in really good shape, but want to be proactive there. And as we have seen a little bit of a slowdown, we have taken some action. We do not expect that to continue through the year. As we mentioned, our expectation is for Brazilian price realization to be positive for the full year. And we have seen positive price in North America. Recall that we did some accrual in the third quarter of last year in Large Ag for pool funds that should provide some easier comps as you move through the course of the year as well. So our expectation is to still maintain that point and a half for Large Ag price. Yeah, Kristen.

This is Josh Jepsen. I think on the PPA side, that point and a half for the full year, and I think we would expect that really as we run through the remaining quarters. So not too lumpy or different as we go two through four Q. Yeah. Maybe just a bit on C&F. We took the guide down slightly. That was not a function of our lack of confidence in us being able to execute price increases. It is really a function of how fast the year started. We announced some price increases in January, and quite frankly, we were surprised at how quickly we built our backlog in the first couple of months of the year.

So the price actions are going to be delayed a little bit. It is important to keep in mind that it is Wirtgen, its parts, and also earthmoving. And so it is a combination. Each one will do a little bit differently. And then over the rest of the year, we will start to lap some of the more aggressive pricing actions that we had to take last year. So overall, we still feel very confident in the price realization for the year.

Unidentified Speaker: Kristen.

Operator: Our next question comes from Angel Castillo from Morgan Stanley.

Josh Beal: Hi, thanks for taking my question.

Christopher Seibert: Want to maybe follow up on that, if you could just talk a little bit more in detail about what is going on in terms of the order strength. In particular, I guess, on the C&F side, to comment on the pricing that you have been surprised by. Recognize it might be difficult to unpack, but just curious if you are seeing if you are able to split that up between what might be, you know, one big beautiful bill

Josh Beal: kind of bonus depreciation related, you know, any kind of versus end market driven versus kind of the outperformance driven by, you know, all the portfolio product innovation you

Christopher Seibert: are talking about.

Josh Beal: Or just merchandising incentives. Just curious the puts and takes across the various kind of tailwinds that might be driving some of the strength if you are able to kind of unpack that.

Christopher Seibert: Yeah.

Josh Beal: Start, Angel, and Brian just jump in. I mean, first and foremost, I would just point to contractor confidence. More and more as we have conversations with contractors, they feel good about their backlog, and, candidly, they feel good about that backlog growing even as they look into 2027 as well. So I think it is strength in their end markets and particularly around larger projects. I mean, infrastructure mega projects, certainly supporting data centers as well, is where we are seeing more of that strength. Housing, still subdued to start the year.

Some expectation that will pick up a little bit, get some meetings as we move through the course of the year, but that is still a segment for smaller contractors where there is still challenge on the housing side. But again, particularly for those larger folks, they are seeing strength in their order book, and I think that is starting to translate in order activity. Yeah. Just to add to that, Angel, we have seen rental re-fleeting, which has been positive. Our retails were at mid-teens in the quarter, so seeing strength there. So not only order activity, but retail more than matching, which has helped as well.

I think that has given us more confidence as we have seen that build. Just maybe to summarize, kind of all of the above of the things that you identified. I have been out quite a bit with customers, geographic mix and a broad swath of the different types of construction, and it is really broad based. They feel confident. I think the construction activity has been strong the last couple years. They were probably a little more cautious with respect to fleet for various reasons last year and the year before that, but now the confidence in their backlogs is growing and they need to start making more investments in the fleet.

And maybe just one last comment on Wirtgen side too. We are seeing strength there. We mentioned that is not just concentrated in North America, certainly strong infrastructure investment there. But Europe as well, we are seeing some pickup. Infrastructure in Germany, as an example, has been positive. So strength in both of those markets as well on the roadbuilding side. Thanks, Angel.

Christopher Seibert: Thank you. And, Justin, wish you all the

Unidentified Speaker: Our next

Operator: question comes from Stephen Volkmann from Jefferies.

Josh Beal: Hi. Good morning, everyone. Maybe I will just stay with this topic. I guess given what you guys are all saying, which sounds very reasonable, kind of up to up 5%-ish kind of forecast feels pretty conservative. So I am curious if you think there are some headwinds that we should be keeping in mind maybe as the year progresses or something. And then sort of on that same note, your net sales forecast in C&F is quite a bit higher than your end market forecast, so maybe you could tease that part out as well.

Unidentified Speaker: Yeah.

Josh Beal: You know, I think you are right, Steve, that there is certainly optimism. You heard us say that in our prior answer. It is mixed in some segments. Housing has still been subdued. So I think that is part of it. But, I mean, overall optimistic, and we are seeing strength there. On the sales guide, up 15, recall that we did some pretty strong underproduction last year, which has really set us up well for this upturn. I mean, it was close to 10%, just high single digits for the segment last year, and so we are building in line with retail this year, so that is helping.

On top of that, you are getting 2.5 points of price or getting positive price, and currency has been a tailwind as well. So for all those reasons, we are much closer to 15% now versus those markets we are seeing are up five. Thanks, Steve.

Operator: Our next question comes from David Raso from Evercore ISI.

Josh Beal: Hi. Thank you. And, so we will miss you, Josh.

David Michael Raso: When it comes to the Large Ag commentary, I was intrigued by the order book color. But, obviously, you are not willing to change the guide on Large Ag. I was just curious. That order book, is it coming in just in a sense earlier than you would have thought in the sense of you have the same view, the order book just came into the level where now you feel you have just better visibility. Or are we at the stage where Waterloo or East Moline is starting to kind of increase line rates? And I am not just talking seasonality. I am speaking about versus your original budget.

I am just curious how you are sort of digesting the at least more stable, better order book on Large Ag when, as you pointed out, grain prices—even this morning, some of the USDA corn acre number came in, I thought, kind of constructive, but corn is still not reacting positively. And I am just trying to put together how you are thinking about that order book versus corn prices just are not really supporting the improvement. Thank you. Yeah. No. Thanks for the question, David. I mean, on the North American side,

Josh Beal: our guide is still for the industry down 15% to 20%. And maybe breaking that down by product lines. Our spring seasonal products, things like sprayers and planters, those EOPs happened over the course of last summer, wrapped up in August–September. Still a lot of uncertainty in the market, and prices for commodities were much lower at the time. Those product lines are probably the upper end of that range, closer to 20. What we have seen over the course of the quarter from a—oh, sorry—closer to 20 at the upper end of that range for those product lines.

What we saw over the course of the quarter on the tractor side was some pickup in order velocity, particularly in the last month or so. So we are probably closer to down 15 or so on tractors, the lower end of that range. And then combines, as we mentioned in our commentary, as we close out that EOP, that will finish better than the range. It is more like probably down 10% to 15% for combines in that segment. So, what are we seeing? What is driving that? As you are right, I think from an ag fundamental standpoint, still challenged and have not seen a whole lot of change there over the course of the quarter.

However, we do feel like things are more stable certainly than where we were in the last summer into the fall. We have seen China come back to the market. We have seen some stability in grain prices. Not a lot of upside at this point in time to your point, some of the recent news. But we have seen some stability there. And then I think the other thing to keep in mind is that the age of the fleet is getting older. We have not seen much replacement over the last couple years, and you do have some folks that do need to look to replace, even despite what we are seeing with ag fundamentals.

When you see an improving used inventory market, and we mentioned some significant improvement even over the course of the quarter. And I think most notably, model year 2022, 2023 8Rs down 20% sequentially in the quarter, just gives you a sense of how those are starting to move. That is starting to free up the trade ladder, free up movement there. And so we are seeing a little bit of pickup from a replacement demand. Not a massive inflection, again, given where the fundamentals are. But replacement does come back over time just given that situation. Yeah.

Josh, the only thing I would add to that, Dave, to your question is, yeah, we are seeing some increased build rates in tractors, and it is kind of back-half related to this order activity that we saw come through. Josh mentioned, we are already out nearly through March. So back half of the year, we see some of that step up, but that is based on actual orders that we are seeing. And I think really underlying some of the replacement that Josh just mentioned. And as we see used get healthier, I think that is aiding that trade ladder, aiding the ability to move those used. We have seen stability in used prices.

And then as you take inventory down, it is facilitating more activity there.

David Michael Raso: Thank you. Thank you.

Operator: Our next question comes from Tim Thein from Raymond James. Thank you. Good morning

Josh Beal: yeah, Josh, Jepsen, all the best, and thank you for your help over all these many years. Just a question circling back on kind of the outline as we came into the year with respect to price versus production costs. Given that maybe slower start to the year in some of these segments? Are we—but then you have also mentioned some maybe fluctuations on the cost and tariff side. Has anything changed in terms of the expectation for the full year and how you expect to play out in terms of price versus

David Michael Raso: cost?

Josh Beal: Yeah. Thanks, Tim. I mean, you are right. Some changes over the course of the quarter. We are probably closer now to price-cost neutral for the full year, just given particularly a little bit of a reduction on the pricing side in C&F. Tariff costs—and by the way, that price-cost neutral is inclusive of the $600 million of incremental tariffs that we are seeing this year. So we are covering that tariff piece coming into the business in 2026. But we have—tariffs have been roughly flattish quarter over quarter. There were some puts and takes there, but that $1.2 billion for the full year guide on tariffs is still unchanged.

We have seen a little bit of change and maybe a little bit more inflationary pressure on materials, but offset by some improvements on the overhead side as we have added volume. We are seeing more overhead efficiency, and so will be slightly unfavorable from a production cost standpoint ex-tariffs. But overall, again, price-cost neutral with the price actions that we are taking. Yes. And maybe just one thing. First quarter, ex-tariffs, we were production cost favorable. So I think it speaks to just the things we can control and how we are operating in an environment with a fair bit of uncertainty. Thanks, Tim.

Operator: Our next question comes from Steven Fisher from UBS.

Josh Beal: Thanks. Good morning. And I echo my sentiments. Thanks a lot, Josh. Really appreciate the help. In terms of some of the regional dynamics, I think there were expected to be some pretty big differences between North America and Europe in the first quarter. It sounds like maybe North America ended up being a little bit better on the tractor side perhaps. Anything in particular, a regional production perspective we should be expecting, or just general for Q2, how to model that and any of the differences for the rest of the year because I think those can certainly affect the margin progression in Large Ag.

Unidentified Speaker: Yeah. Thanks for the question, Steve. That is

Josh Beal: regional mix was certainly an impact on Large Ag in the first quarter. I mean, if you look at overall volume in a Large Ag business in Q1, we were effectively flattish year over year in terms of total volume. But that mix was Europe up, Asia—was a smaller part of our Large Ag business—but Asia up, and then both North America and South America down year over year in Q1. So given the different profitability profile, excuse me, for those different geographies, that was unfavorable mix for us in the first quarter. That starts to change as you move through the course of the year.

I mean, as we will see a pickup, particularly in North America production here, in the second quarter. And as Josh Jepsen mentioned, our order books are for tractors, as an example, now into the fourth quarter. So we have got good confidence that we will see that pick up, and we will revert to a more normal mix going forward, and that will aid margins. I mean, you can expect us in Large Ag to do double-digit margins each quarter for the rest of the year. So it really is a mix that is improving as you move through 2026. Yeah. Steven, I think you see that too, like, in gross margins. That really rings through.

And when you look at the first quarter versus the rest of the year, where we bounce back and looked a lot more like what we did for gross margins in PPA in 2025 and the remainder of the year, where it would operate. And a big part of that is a little bit more normal mix geographically.

Unidentified Speaker: Thank you very much.

Christopher Seibert: Thank you.

Unidentified Speaker: Our next

Operator: question comes from Chad Dillard from Bernstein.

Josh Beal: Hey, good morning, guys. I have got a quick question for you on tariffs. So if we get a tariff relief will they get rolled back to farmers? And how soon did that happen? Is this something that you need to wait to see until, like, the 2027 model year pricing?

Unidentified Speaker: Yes.

Josh Beal: Yeah. And so maybe just to break down a little bit, Chad, on the exposure. So like I mentioned, total tariff costs this year in 2026 is $1.2 billion pretax. And if you break that down, kind of by exposure, the UFLPA tariffs is a little less than half of that, a little bit higher in February, but a little less than half is UFLPA. So we will see what happens on the Supreme Court side. It has been a very dynamic environment, so it is hard to say if those go away or something else does not come back. So we will watch how that plays out. We will not react too quickly.

Similar to when we saw tariffs going up last year, we did not take immediate price action, and could expect a similar approach for us this year in 2026 as well. Yeah. I just reiterate, Chad. I mean, we were

David Michael Raso: relatively muted. I mean, we are well below normal or historical averages for price. I mean, last year in PPA, we did

Josh Beal: just below a point. We are talking about a point and a half here this year. So we have not taken outsized price as it is related to tariffs. We are focused on how do we mitigate, how do we work our way through those. We have seen good progress on mitigation on February. And teams continue to do a lot of really good work. So I think we are kind of head down focused on that, and we will see how the environment changes. But going to keep working on that and focus on the things that we can manage. Thanks, Chad.

Operator: Our next question comes from Jerry Revich from Wells Fargo.

Josh Beal: Hey, this is Kevin on for Jerry Revich. Just had a quick question about Large Ag used inventories. Based on our data, we are seeing North America Large Ag used inventory destock accelerated over the quarter by 4%. Just trying to understand, were there any higher pool funds or other incentives? And is this pace of destock sustainable based on what you are seeing? Yeah. Kevin, thanks for the question. As we mentioned, we see really good progress in the first quarter, and maybe worth repeating again. Particularly late model tractors, we saw a really significant reduction over the quarter. I mean, 2022s and 2023 8Rs down 20% sequentially in the quarter, even model year 2024s down 10%.

So really good movement there. We did this in 2025. We increased the pool fund contribution rate to keep those levels healthy for our channel. And then we will continue to support the market with pool funds. We did a little bit in Q1, but still positive price for North America. So like I said, we are seeing good momentum there. We are seeing good movement. Our first quarter tends to be the strongest quarter of the year for used reduction. You do see a lot of year-end calendar buying. So you will see probably more moving in Q1 than you will as you go to some of these other quarters.

But we have seen continued progression quarter over quarter, really for the last better part of the year or so. Expect that to continue going forward.

Unidentified Speaker: Thanks, Kevin. Thanks.

Operator: Our next question comes from Jamie Cook from Truist Securities. Hi, good morning. And Josh Jepsen, thanks for your help throughout the years, and best of luck to you. I guess just my question in terms of how we are managing Large Ag. It seems like things are getting better. You talked about the combines coming in better, order velocity improving. To what degree—I know you have orders through the third quarter—to what degree do you want to limit production, I guess, in 2026 to set yourself up for a better 2027 in terms of how you are managing things?

And then I guess my second question, just with Large Ag getting better, production sort of moving up, surprised your margins in the mix getting better with more North America. Just surprised margins would not be more towards the upper end of the range for the year in Production & Precision Ag. Thank you.

Josh Beal: Yes. Thanks, Jamie. Certainly, as you mentioned, we have seen improvement over the course of the quarter. For combines, as you know, we base our production for the year on that early order program. So that largely defines what we are going to build this year. And so I would not say there is any really much change. It will be pretty level through the rest of the year on combines. Tractors, as we have mentioned, order book is now into the fourth quarter. We have seen some increased momentum there. And as Josh Jepsen said, we will pick up some production towards the back half of the year.

Probably not a whole lot of change now at this point, and we are getting pretty close to where the full year—we will have the year filled up. We will see how things play out over the next quarter or so as we build out the book for the rest of the year. But we will be pretty steady, pretty level now based on our plans for the rest of the year. Margin, certainly, as we see North America come back, that is good mix. We have seen a little bit of softening in South America. That is a very profitable region for us as well.

And so some puts and takes there that do not drive the margin too different from what we have originally forecasted. Hey, Jamie. It is Josh Jepsen. I think the one thing I point out is we are still below trough levels for Production & Precision Ag overall, and North America below that. So when you—just the overall magnitude of

David Michael Raso: North America being down 15% to 20% and the pull

Josh Beal: or negative impact on margins is real there. So I think we are glad to see some of that order activity move, but it is not—to Josh's point—it is not a bounce. It is not inflecting hard. It is just, we are seeing some positive progress and momentum. So that, I think, does demonstrate we should see momentum as we go forward. Inventories in good shape. Factories are running really lean. So

David Michael Raso: as we see demand come back, I think we will see

Josh Beal: strong incrementals, particularly ex-tariffs, but we are still kind of coming off of very low levels right now.

Unidentified Speaker: Thanks, Jamie. Congrats. Our next question comes from Tami Zakaria from JPMorgan.

Operator: Hi, good morning. My question is on the new excavator, which is quite exciting.

Tami Zakaria: Curious whether you can comment on any marketing plans around the launch of this. Are you expecting to put in some promotions to gain share, any financing promotions, incentive for dealers, or anything along those lines to start off on a strong note.

Josh Beal: Yeah. I think the big splash that we have is out at CONEXPO, and so that will be the big launch event. We spend a lot of time with a lot of different operators from customers across the country testing the capabilities of the equipment. We had a big launch party and a large launch event with them. And so I think the

Unidentified Speaker: the

Christopher Seibert: the capability

Josh Beal: and the quality of the equipment and what we are going to deliver to the marketplace is pretty well known. We have done more testing than we have in the past. With respect to incentives, the excavator market

David Michael Raso: has been

Josh Beal: pretty challenging from a price perspective over the last couple years.

Christopher Seibert: This new model gives us

Josh Beal: differentiation that we have not had over the last couple years. We are not going to significantly take price with that, but the value that we are offering to our customers through this and through all the work that we have done, we feel like they really understand it, and continue to do that. And, again, at CONEXPO, we will continue to emphasize the message, the value that we are delivering through technology, through improved durability, and just the productivity and capability of the new excavator. We think we are in a great spot to launch, and the teams are super excited. The dealers are super excited. There are good products in the market today.

We have had a long-standing relationship with Hitachi with good products. This is a truly differentiated product that we are super excited to bring to the marketplace. Thanks, Tami.

Unidentified Speaker: Our next question

Operator: comes from Sabahat Khan from RBC Capital Markets.

Josh Beal: It is great. Thanks and good morning. Maybe just a two-parter there. I think the initial comments around some of the shipments during the quarter being a little bit better.

Christopher Seibert: I guess based on the order book, are you finding that this is more of a structural shift in the outlook that the farmers on the ground have maybe because of some of the trade issues easing and or other factors? And then secondly, just as trade issues do ease for the U.S. and

Josh Beal: China starts to order, how are you thinking about the offset in South America where maybe some of the orders for soybeans and other things might moderate? So how are you thinking about that on that basis? Thanks so much.

Christopher Seibert: All the best. Yeah. Thanks.

Josh Beal: Thanks, Sabahat. I mean, specific to the quarter, I would say largely, we ran really well in our factories. So we talked about overhead efficiencies that we saw in the quarter as we ran so well. Tractors in North America, we shipped a little bit more than anticipated, just given how the factory ran. And so I would not say in the quarter that production was so much demand related versus just how we ran in our operations. But as you think about overall for Large Ag, we talked about the pickup in North America. We have hit that point already just on some of the improved optimism we have seen there.

It is a minor inflection, but we have seen some positive momentum there. South America, the way I have described that is just a little more caution in the market. There are a few factors at play there. Certainly, the high interest rates that we have seen in the region have been pressuring customers. We saw the real appreciate quite a bit over the course of really the past month, month and a half. Given the structure of our customers' operations, they sell a lot of their commodities in U.S. dollars. That puts some pressure on their margins. So we have seen a little more caution there as well.

And, certainly, they are keeping an eye on the presidential election in the country that is coming up at the end of the year as well. So for all those reasons, a little more caution in the market, and we have seen just a bit of cautious ordering as a result. Hey, Sabahat. It is Josh. And I think the one thing to your point on trade flows and how does this balance North America, South America. I think there are a couple positive things here, and that is domestic consumption in both geographies, North and South America. North America, we are seeing more crush of soybeans domestically, more used domestically. And conversely, exports of corn and ethanol are higher.

And in part, you have seen Brazil actually consume more corn and more ethanol domestically. I think you are seeing some puts and takes and just shifts in terms of how domestic markets are evolving vis-à-vis what is happening in export. So think positive is we are seeing strong demand both in-country when you go U.S. and South America, Brazil in particular. And then obviously some shifting as trade impacts that. But I think as things settle there, the important part is the strong demand we are seeing that is consuming those

David Michael Raso: those grains domestically.

Josh Beal: Thanks, Sabahat.

Operator: Our next question comes from Mike Shlisky from D.A. Davidson.

Unidentified Speaker: Yes. Hi, good morning. Thanks for taking my question.

Josh Beal: Want to add my sentiment. Josh, thanks for everything. All the best to you. I kind of wanted to just dive into your little more opposite tone on Large Ag and some of the order trends that you are seeing, especially in combines. Are you seeing or do you think you will be seeing

Christopher Seibert: any market share gains this year?

Joel Jackson: And I was curious whether you could tell us about tech attachments on some of your combines or other products. Are more farmers taking on the ultimate package or other prescriptions this year that might start to benefit you in 2027?

Josh Beal: Yeah. Thanks, Mike. Yeah. I mean, I think overall, Large Ag in North America, over the last 12 to 18 months, we have seen a little bit of share. I think as we have been leaner on the new inventory side, more focused on driving used down, and we have talked about the progress that we have seen there. As a result, we are set up really well coming into 2026. Our expectation is we have got some opportunity to gain some share as we move through the course of the year. Yeah. On the tech side on combine, super excited. Last year was our first year of Harvest Settings Automation, Predictive Ground Speed Automation.

We saw really good success in the field. On Harvest Settings Automation, over 60% utilization of operators in the cab had that tech on while they were harvesting last fall, and saw really good productivity gains, really good throughput gains. And as a result, we are seeing a pickup in take rates on that option as well. So 99% of the combines that were ordered this year through the EOP had some level of harvest automation, and nearly 80% of that were taking the highest level, the Ultimate package. That is a four or five points better year over year.

And so we have seen really good gains there, and we would expect that to translate into good utilization in the fall as well.

David Michael Raso: Yeah. Maybe stepping back to, as we think about just overall tech adoption,

Josh Beal: and our conversations around are we covering acres with more Deere technology. Our engaged acres stepped up again this quarter to over 500 million engaged acres. That is over 10% increase from a year ago, and about a 25% increase on highly engaged. So nearly a third of those engaged acres are highly engaged. So we are continuing to see progression there, which speaks to what we are doing on connectivity and making sure we are reaching deeper into the fleet, but we are seeing that progress. And we are seeing it progress really across the world, which is positive as well. Thanks, Mike.

Unidentified Speaker: Thanks.

Operator: Our next question comes from Jairam Nathan from Daiwa. Hi. Thanks for taking my question. So

Christopher Seibert: Justin mentioned in your comments about biofuels.

Jairam Nathan: If you could just expand on that and what your expectations are, medium term. And on construction, I think one of your competitors yesterday talked about bringing back some of the incentives. If you could address that as well. Thank you.

Josh Beal: Thanks. Thanks, Jairam. Sorry. On the biofuels question, certainly, as Josh said, around the world, we have seen the power of increased consumption of biofuels. Brazil is a great example, where more and more of their corn production is going into ethanol, and that is having a positive impact. Looking forward, we are looking at a number of different areas. Certainly, in the near term, some of the opportunity around the RVO and what that might mean for 2026 and 2027. Keep an eye on that. E15, as that legislation continues to move through Congress as well, we see opportunity there to increase consumption longer term for corn through E15. So, a number of different fronts. We see opportunity there.

On the—switching to the competitive side on Construction & Forestry—certainly, that has been a competitive market. We have seen that over the last 12–18 months. We have seen competition, as of late last quarter or two, take some price increase, signal some price increase. The timing of that, we are keeping an eye on. Our favorite competitors still have a lot of inventory in the field. So as those price increases for 2026 start to manifest themselves in transaction price, there is a bit of a lag there. That creates some pressure. But overall, as we said, we feel good about the price increases that we have taken.

Opportunity to continue to drive increased realization as we move through the course of the year.

Unidentified Speaker: Thanks, Jairam. Thanks.

Operator: Our last question comes from Evan McCall from BMO Capital Markets.

David Michael Raso: Hi, good morning. It is Evan on for Joel. Just wanted to talk about your cadence of earnings for the year. If you could just give some color on that. And if you see growth in Q3 as possible, or would Q4 be the first possible quarter of growth?

Unidentified Speaker: Thank you. Yeah. I mean, as we

Jairam Nathan: as we look to

Joel Jackson: you know, through the balance of the year for equipment operations as a total,

Josh Beal: our expectation is to see a bit of growth as we move through the entirety of the year. It is less—we lapped some significant underproduction, particularly in Construction & Forestry, than we saw in Q1, as we mentioned, Q1 last year. So it was an easier comp in Q1, but expect to see kind of mid-single-digit growth for most quarters for the balance of the year. Yeah. I think PPA, if you look at that one specifically, Evan, you can think about that. The probably the toughest comp is Q2 and then get easier when you get to the back half of the year from a top-line perspective.

And then you have got kind of the—call it a pretty equal—tariff burden as you move through the year?

Unidentified Speaker: Thanks, Evan. Thanks. Looks like

Josh Beal: the last call we have for the day. Thanks all for taking the time with us today. We appreciate your time, and thanks for joining. Have a great day.

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

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