By Nathan Gomes

(Reuters) -Deere & Co cut the lower end of its annual profit forecast on Thursday but beat Wall Street expectations for second-quarter results due to cost-saving measures and inventory management, sending its shares up 5% in early trading.

Farmers facing high interest rates and weaker crop prices are leaning towards renting rather than buying machinery, weighing on sales of big-ticket equipment such as tractors and combines.

Deere was able to cushion the blow from softer demand by reducing production and warranty-related expenses.

U.S. President Donald Trump's tariffs have added to production costs and fueled uncertainty for large industrial firms.

Executives said during an earnings call that they expect tariffs to cost Deere more than $500 million in 2025 before taxes and that they were taking a measured approach to the ongoing uncertainty.

The company was prepared to invest $20 billion in the U.S. over the next decade, CEO John May said.

"We got the sense that Deere's core business may be unchanged on a global basis, were it not for tariffs," said D.A. Davidson analyst Michael Shlisky.

Peer CNH Industrial slashed its annual profit forecast this month, hurt by lower shipments due to cooling demand.

Deere and CNH struggled to keep pace with strong tractor demand in 2022, when farm income hit a record high and pandemic assistance payments gave farmers extra money to upgrade their fleets.

CFRA Research analyst Jonathan Sakraida said they expected continued headwinds through 2025 as Deere navigates current market pressures.

The world's largest agricultural-equipment maker expects its annual net income to now be between $4.75 billion and $5.5 billion, compared to its prior forecast of $5 billion to $5.5 billion.

Its second-quarter revenue fell about 18% to $11.17 billion from last year, compared to analysts' estimate of about $10.8 billion, according to data compiled by LSEG.

Quarterly net income fell to $1.8 billion or $6.64 per share, compared with $2.37 billion or $8.53 per share a year ago. Analysts on average had expected the company to report a profit of $5.58 per share.

(Reporting by Nathan Gomes in Bengaluru; Editing by Pooja Desai)