Deere & Co (DE) Stock Analysis and Metrics

Deere

NYSE: DE

$582.63 ▼ -14.61 (-2.45%)

At close: Jul 20, 2026 · 3:26 PM UTC

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About

Deere & Company manufactures agricultural, construction, and forestry equipment while providing financial services to support its equipment sales. The company operates globally with a focus on integrating advanced technology into its machinery to improve customer productivity and sustainability.

Deere & Company generates revenue through the sale of equipment and related parts and services across its three equipment segments, as well as through financing and interest income from its Financial Services segment. The company sells products to farmers, contractors, and landowners, and provides loans, leases, and warranty contracts to dealers and end-users.

The company operates through the following segments: Production & Precision Agriculture, Small Agriculture & Turf, Construction & Forestry, and Financial Services.

• Production & Precision Agriculture focuses on large-scale farming equipment including four-wheel-drive and track tractors, harvesters for corn soy cotton and sugarcane, tillage seeding and application equipment, and related precision technology solutions.

• Small Agriculture & Turf provides specialty utility and compact tractors, hay and forage equipment, self-propelled forage harvesters, turf and utility equipment such as riding lawn mowers commercial mowing equipment golf course equipment utility vehicles and implements for residential commercial golf and sports turf care.

• Construction & Forestry manufactures excavators motor graders crawler dozers and loaders skid steers compact excavators compact wheel loaders backhoes articulated dump trucks milling machines recyclers slipform pavers surface miners asphalt pavers compactors rollers mobile crushers and screens skidders feller bunchers forwarders harvesters and precision forestry technology solutions.

• Financial Services provides retail notes revolving charge accounts wholesale receivables leases and extended warranties to support equipment sales in the United States Canada and internationally through company-owned subsidiaries and joint ventures with local financial institutions.

Deere & Company holds a strong competitive position in the global agricultural equipment industry, facing rivals such as AGCO Corporation, CLAAS KGaA mbH, CNH Industrial N. V., Kubota Tractor Corporation, and The Toro Company, while maintaining advantages through brand recognition, integrated technology solutions, and a extensive dealer network. In construction and forestry, it competes with Caterpillar Inc., CNH Industrial N. V., Doosan Infracore Co., Ltd., Fayat Group, GOMACO Corporation, Hitachi Construction Machinery, Komatsu Ltd., Kubota Tractor Corporation, LGMG, Liugong, Ponsse Plc, SANY Group Co., Ltd., SDLG, Terex, Tigercat Industries Inc., Volvo Construction Equipment, and XCMG.

The company serves production-scale growers of corn soy cotton and sugarcane, dairy and livestock producers, high-value crop and small acreage farmers, turf and utility customers including golf course maintenance providers, landscapers, and residential and commercial property owners, as well as contractors in earthmoving forestry roadbuilding and material handling industries across North America, Europe, Latin America, Africa, Asia, and Australia.

Investment Thesis

▲ Bull case

Deere's diversified business model is demonstrating strong resilience, with Construction and Forestry and Small Ag and Turf segments delivering robust growth that is more than offsetting the downturn in Production and Precision Ag. Construction and Forestry net sales surged 29% in Q2 FY26, driven by higher shipment volumes and over 2.5% price realization, while the segment's operating margin expanded to 14.8% due to favorable pricing and volume leverage. The order backlog for construction equipment in the U.S. and Canada has risen over 60% since November, with more than 80% of 2026 production slots now filled, indicating sustained demand momentum. Simultaneously, Small Ag and Turf net sales increased 16%, supported by higher shipments, 1.5% price realization, and 2.5% positive currency translation, pushing operating margins to 20.6% as volumes and pricing contributed to margin gains. This diversification allows Deere to maintain overall equipment operations margins at 16.9% despite a 14% decline in large ag sales, as the strength in non-ag segments buffers cyclical weakness in core markets. The company's ability to generate double-digit margins across all segments even during a downturn underscores the structural improvement in its business model from cycle to cycle, positioning it to outperform when agricultural demand eventually recovers.
Deere's strategic investments in precision agriculture technology and digital connectivity are creating a high-margin recurring revenue stream that is underappreciated by the market, with strong adoption metrics signaling long-term value creation. The company reported 25% quarterly growth in global JDLink Boost kit sales and nearly 440,000 monthly active digital users, reflecting accelerating engagement with its software and connectivity ecosystem. Recent software enhancements to SenseSpray and FurrowVision, along with the launch of six new ADAR and ADAR X tractors (440-540 horsepower), are expanding the addressable market for precision solutions into new crops like wheat, barley, and canola. Deere highlighted that See & Spray technology is delivering 50% to 60% herbicide savings for customers, driving increased utilization and retention, with renewal rates for Precision Essentials exceeding 90% for customers in their second year of renewal. The company's partnership with Starlink for satellite-based connectivity has already sold over 12,500 JDLink Boost kits since late 2024, expanding its connected fleet and enhancing the value of its digital and SaaS offerings. These innovations are not only improving customer productivity and input efficiency but are also building a sticky, high-margin digital business that is less tied to cyclical equipment sales and more aligned with long-term value creation through data and services.
Deere's proactive inventory management and disciplined capital allocation are creating a favorable setup for a strong recovery in large ag equipment demand, with improving used inventory trends and aging fleets signaling pent-up replacement demand. North American high-horsepower tractor and combine inventories are down over 50% from their mid-2024 peak, while used inventories are down mid-teens from their March 2024 peak, and model year '22-'23 tractors are down 45% from prior highs, reflecting a healthier inventory profile. The company has managed field inventories tightly and made significant progress on used equipment, allowing machine hours to accrue and the fleet to age out, which drives a base-level need for replacement. Deere expects to see slightly higher revenue in the back half of FY26, with the fourth quarter higher than the third, and anticipates more favorable cost comparisons in Q4 due to lapping prior-year tariff and inflation impacts. The company's baseline view remains that 2026 represents the bottom of the ag cycle, with recovery expected in 2027 driven by core fundamentals like fleet age, inventory correction, and policy support such as increased renewable volume obligations and disaster relief program payments. This setup, combined with Deere's strong balance sheet and commitment to $20 billion in U.S. manufacturing investments over the next decade, positions the company to capture disproportionate upside when agricultural demand rebounds.

Deere's diversified business model is demonstrating strong resilience, with Construction and Forestry and Small Ag and Turf segments delivering robust growth that is more than offsetting the downturn in Production and Precision Ag. Construction and Forestry net sales surged 29% in Q2 FY26, driven by higher shipment volumes and over 2.5% price realization, while the segment's operating margin expanded to 14.8% due to favorable pricing and volume leverage. The order backlog for construction equipment in the U.S. and Canada has risen over 60% since November, with more than 80% of 2026 production slots now filled, indicating sustained demand momentum. Simultaneously, Small Ag and Turf net sales increased 16%, supported by higher shipments, 1.5% price realization, and 2.5% positive currency translation, pushing operating margins to 20.6% as volumes and pricing contributed to margin gains. This diversification allows Deere to maintain overall equipment operations margins at 16.9% despite a 14% decline in large ag sales, as the strength in non-ag segments buffers cyclical weakness in core markets. The company's ability to generate double-digit margins across all segments even during a downturn underscores the structural improvement in its business model from cycle to cycle, positioning it to outperform when agricultural demand eventually recovers.
Deere's strategic investments in precision agriculture technology and digital connectivity are creating a high-margin recurring revenue stream that is underappreciated by the market, with strong adoption metrics signaling long-term value creation. The company reported 25% quarterly growth in global JDLink Boost kit sales and nearly 440,000 monthly active digital users, reflecting accelerating engagement with its software and connectivity ecosystem. Recent software enhancements to SenseSpray and FurrowVision, along with the launch of six new ADAR and ADAR X tractors (440-540 horsepower), are expanding the addressable market for precision solutions into new crops like wheat, barley, and canola. Deere highlighted that See & Spray technology is delivering 50% to 60% herbicide savings for customers, driving increased utilization and retention, with renewal rates for Precision Essentials exceeding 90% for customers in their second year of renewal. The company's partnership with Starlink for satellite-based connectivity has already sold over 12,500 JDLink Boost kits since late 2024, expanding its connected fleet and enhancing the value of its digital and SaaS offerings. These innovations are not only improving customer productivity and input efficiency but are also building a sticky, high-margin digital business that is less tied to cyclical equipment sales and more aligned with long-term value creation through data and services.
Deere's proactive inventory management and disciplined capital allocation are creating a favorable setup for a strong recovery in large ag equipment demand, with improving used inventory trends and aging fleets signaling pent-up replacement demand. North American high-horsepower tractor and combine inventories are down over 50% from their mid-2024 peak, while used inventories are down mid-teens from their March 2024 peak, and model year '22-'23 tractors are down 45% from prior highs, reflecting a healthier inventory profile. The company has managed field inventories tightly and made significant progress on used equipment, allowing machine hours to accrue and the fleet to age out, which drives a base-level need for replacement. Deere expects to see slightly higher revenue in the back half of FY26, with the fourth quarter higher than the third, and anticipates more favorable cost comparisons in Q4 due to lapping prior-year tariff and inflation impacts. The company's baseline view remains that 2026 represents the bottom of the ag cycle, with recovery expected in 2027 driven by core fundamentals like fleet age, inventory correction, and policy support such as increased renewable volume obligations and disaster relief program payments. This setup, combined with Deere's strong balance sheet and commitment to $20 billion in U.S. manufacturing investments over the next decade, positions the company to capture disproportionate upside when agricultural demand rebounds.

▼ Bear case

Deere's core Production and Precision Ag segment continues to face severe structural headwinds that are being masked by one-time benefits and cyclical strength in other divisions, with persistent volume declines signaling deepening market weakness. Net sales in Production and Precision Ag fell 14% in Q2 FY26 due to lower shipment volumes, only partially offset by 1% price realization and 3% favorable currency translation, and the segment's operating margin contracted to 15.7% from 22.0% year-over-year, reflecting the dual impact of weaker demand and higher production costs. Management acknowledged that large ag customer sentiment remains muted due to grower margins facing headwinds from elevated and volatile input costs and high interest rates, with industry sales in the U.S. and Canada expected to decline 15% to 20%. The company's net income guidance for FY26 remains unchanged at $4.5 billion to $5 billion, despite the $272 million IEEPA tariff refund that artificially inflated equipment operations margins by nearly 2.5 percentage points in Q2, suggesting that underlying operational performance is weaker than reported. The persistence of double-digit sales declines in the core ag segment, even as Deere highlights diversification, indicates that the company is relying on non-ag businesses to carry the financial performance, which may not be sustainable if construction or small ag demand weakens.
Deere's exposure to tariff costs remains a significant and understated margin headwind, with the company's net tariff cost forecast of $900 million for FY26 representing a persistent 3% drag on equipment operations margins that is not being fully offset by pricing or cost mitigation efforts. Although the IEEPA tariff refund provided a one-time benefit in Q2, Josh Beal confirmed that direct tariff exposure remains essentially unchanged at approximately $1.2 billion for the year, or a 3% margin headwind, and net of refunds, the forecast includes $900 million in tariff costs. Brent Norwood acknowledged that the company's implied net price realization for equipment operations is between 1.5% and 2% for the year, which is consistent with general inflation levels excluding tariffs, meaning that tariff costs are not being recovered through pricing and are instead diluting margins. The company's mitigation strategies—such as resourcing, reshoring, exemption submissions, and USMCA compliance—are described as ongoing efforts with no guarantee of full offset, and Norwood admitted that tariff rates have been inconsistent and dynamic, making effective management challenging. This persistent tariff burden, combined with the lack of pricing power to pass costs to customers, poses a material risk to margin stability, especially if inflation remains elevated or tariff policies shift unpredictably.
Deere's South American ag market outlook has deteriorated significantly, with industry tractor and combine sales now expected to decline 15%, yet the company's bullish narrative on the region overlooks deepening macroeconomic and political risks that could undermine long-term growth prospects. Josh Beal revised the South American outlook from down 5% to down 15%, citing margin pressure from high input costs, interest rates, and currency headwinds, particularly the strengthening Brazilian real against the U.S. dollar, which is adding incremental margin pressure for growers. Despite Deere's claims of market share growth and double-digit margins in Brazil even at trough levels, the company acknowledged that Brazilian farmers are more exposed to current spot prices for inputs due to their planting cycle, and that interest rates in the country remain high with easing expectations reduced given anticipated inflation. The situation in Iran is affecting Brazilian growers at a sensitive point in their production cycle as they prepare to plant a new crop in September, increasing near-term uncertainty. While Deere highlights product localization, technology rollouts like See & Spray Green on Green, and strong dealer channel support, these initiatives may not overcome systemic challenges if input costs, financing costs, and currency volatility persist, potentially limiting the region's ability to become a reliable growth engine as management suggests.

Deere's core Production and Precision Ag segment continues to face severe structural headwinds that are being masked by one-time benefits and cyclical strength in other divisions, with persistent volume declines signaling deepening market weakness. Net sales in Production and Precision Ag fell 14% in Q2 FY26 due to lower shipment volumes, only partially offset by 1% price realization and 3% favorable currency translation, and the segment's operating margin contracted to 15.7% from 22.0% year-over-year, reflecting the dual impact of weaker demand and higher production costs. Management acknowledged that large ag customer sentiment remains muted due to grower margins facing headwinds from elevated and volatile input costs and high interest rates, with industry sales in the U.S. and Canada expected to decline 15% to 20%. The company's net income guidance for FY26 remains unchanged at $4.5 billion to $5 billion, despite the $272 million IEEPA tariff refund that artificially inflated equipment operations margins by nearly 2.5 percentage points in Q2, suggesting that underlying operational performance is weaker than reported. The persistence of double-digit sales declines in the core ag segment, even as Deere highlights diversification, indicates that the company is relying on non-ag businesses to carry the financial performance, which may not be sustainable if construction or small ag demand weakens.
Deere's exposure to tariff costs remains a significant and understated margin headwind, with the company's net tariff cost forecast of $900 million for FY26 representing a persistent 3% drag on equipment operations margins that is not being fully offset by pricing or cost mitigation efforts. Although the IEEPA tariff refund provided a one-time benefit in Q2, Josh Beal confirmed that direct tariff exposure remains essentially unchanged at approximately $1.2 billion for the year, or a 3% margin headwind, and net of refunds, the forecast includes $900 million in tariff costs. Brent Norwood acknowledged that the company's implied net price realization for equipment operations is between 1.5% and 2% for the year, which is consistent with general inflation levels excluding tariffs, meaning that tariff costs are not being recovered through pricing and are instead diluting margins. The company's mitigation strategies—such as resourcing, reshoring, exemption submissions, and USMCA compliance—are described as ongoing efforts with no guarantee of full offset, and Norwood admitted that tariff rates have been inconsistent and dynamic, making effective management challenging. This persistent tariff burden, combined with the lack of pricing power to pass costs to customers, poses a material risk to margin stability, especially if inflation remains elevated or tariff policies shift unpredictably.
Deere's South American ag market outlook has deteriorated significantly, with industry tractor and combine sales now expected to decline 15%, yet the company's bullish narrative on the region overlooks deepening macroeconomic and political risks that could undermine long-term growth prospects. Josh Beal revised the South American outlook from down 5% to down 15%, citing margin pressure from high input costs, interest rates, and currency headwinds, particularly the strengthening Brazilian real against the U.S. dollar, which is adding incremental margin pressure for growers. Despite Deere's claims of market share growth and double-digit margins in Brazil even at trough levels, the company acknowledged that Brazilian farmers are more exposed to current spot prices for inputs due to their planting cycle, and that interest rates in the country remain high with easing expectations reduced given anticipated inflation. The situation in Iran is affecting Brazilian growers at a sensitive point in their production cycle as they prepare to plant a new crop in September, increasing near-term uncertainty. While Deere highlights product localization, technology rollouts like See & Spray Green on Green, and strong dealer channel support, these initiatives may not overcome systemic challenges if input costs, financing costs, and currency volatility persist, potentially limiting the region's ability to become a reliable growth engine as management suggests.

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Investment Thesis

Timing of Transfer of Good or Service Breakdown of Revenue (2025)

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Investment Thesis

Timing of Transfer of Good or Service Breakdown of Revenue (2025)

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