Deere & Company (DE) stock analysis: Hold

Bro's Verdict
Deep Dive

Rating

HOLD

Confidence

60%

Target Price

$650.00

Upside

+2.8%

Horizon

medium

Deere is a best-in-class franchise in a cyclical upswing, but at 34.97x NTM P/E and 5.1x EV/Rev the shares already discount a recovery not yet visible in reported net income, which is down 4% YoY over the nine months to Aug 2026. The precision ag annuity and improving farm economy offer credible upside toward the $731 consensus and Baird's $800 target, but the extreme multiple premium, insider selling, and unquantified financial services credit risk cap the case. With a 12-month fair value of ~$650 roughly in line with the $632.61 spot, risk/reward is balanced; add on a pullback toward $500-$550.

Executive Summary

•Deere trades at 34.97x NTM P/E on consensus $18.09 EPS, with the blended forward P/E of 28.2x sitting +74% and +2.2 SD above its 2 year average of 16.2x, while TTM P/E of ~47x shows the market is already capitalising an earnings recovery not yet visible in reported net income (down 4% YoY over the nine months to Aug 2026).

•Precision ag is the genuine growth engine: 24,000 Precision Essentials retrofit kits and 8,000 JDLink Boost satellite units ordered, shifting mix toward Smart Industrial recurring revenue attached to the installed base.

•Large ag demand remains the swing factor, tied to farmer net income and crop prices; the Baird upgrade to Outperform with an $800 target and mid 2027 corn futures strength imply the farm economy is inflecting, but this is not yet visible in segment margins.

•Insider selling of $23.4m net over 90 days with zero open market buys, plus 13F holder attrition, sits awkwardly against a stock at all time high multiples and tempers conviction.

Financial Snapshot

•Revenue TTM: $47.93b

•Gross margin: 25.2%

•Operating margin: 13.4%

•Net margin: 10.2%

•ROE: 18.2%

•Debt/Equity: 230.3% (financial services leverage)

•Market cap: $228.26b

•Price: $632.61 (52 week range $433.00 to $721.22)

•Q4 revenue: $11.00b, net income $1.38b

•Q3 revenue: $11.78b, net income $1.77b

•Q2 revenue: $8.00b, net income $0.66b (seasonal trough)

•Q1 revenue: $10.58b, net income $1.06b

•Nine months to Aug 2026: net sales and revenues $35.6b (+7% YoY)

•Nine months to Aug 2026: net income $3.8b (-4% YoY)

•Nine months operating cash flow: $3.3b

•TTM EPS: ~$13.50 (implied, ~361m shares)

•TTM P/E: ~47x

Forward Outlook

•NTM revenue: $41.41b (+8.7% YoY)

•NTM EPS: $18.09 per primary consensus; a later snapshot (1 Oct 2026) shows $22.23 with no earlier snapshots for comparison, so treat $18.09 as the working FY1 figure

•FY+2 EPS: $22.68, implying ~25% growth off the NTM base

•FY+2 revenue: $45.01b

•Operating margin trajectory: modelled toward 15.8% (vs 13.4% current), the key swing to the EPS bridge

•Analyst coverage: 17 analysts, consensus Buy, target $731.2 (median $741, range $570 to $813)

•Q3 FY26 print beat on revenue ($12.61b vs $10.74b est) and EPS ($5.10 vs $4.72 est), a positive revision signal

•Precision ag recurring revenue mix: Smart Industrial software and retrofit attach is the structural margin lever

Valuation Analysis

•NTM P/E: 34.97x on $18.09 consensus (or ~28.5x on the higher $22.23 snapshot)

•Blended forward P/E (EQRV): 28.2x vs 2 year average 16.2x (+2.2 SD, +74%)

•NTM P/S: 4.12x

•NTM EV/EBIT: 21.3x vs 2 year average 18.1x (+0.7 SD, +18%)

•NTM EV/EBITDA: 17.1x vs 2 year average 11.9x (+2.1 SD, +44%)

•NTM EV/Rev: 5.1x vs 2 year average 2.7x (+2.8 SD, +91%)

•LF P/BV: 6.1x vs 2 year average 4.7x (+1.3 SD, +29%)

•PEG: ~1.4x on 25.4% forward EPS growth (reasonable on a growth adjusted basis)

•Historical multiple implied prices: P/E $363.60, EV/EBITDA $374.08, EV/EBIT $503.40, EV/Rev $229.14, P/BV $491.67

•DCF (9.5% WACC, 2.5% terminal growth, ~8% FCF growth): fair value ~$450 to $520, below spot

•Consensus target: $731.2 (median $741)

•Baird target: $800 (upgrade to Outperform)

•12 month fair value: ~$650, roughly in line with spot

Peer Comparison

•AGCO: ~14.6x TTM P/E, $7.3b cap, pure play ag with weaker precision ag attach

•CNH: ~48.5x TTM P/E, $18.7b cap, depressed earnings base inflating the multiple

•CAT: ~34.4x TTM P/E, $367.5b cap, construction and infrastructure leverage, no farm cycle exposure

•KUBTY: ~10.8x TTM P/E, $18.5b cap, value multiple, limited precision ag

•DE premium to AGCO and Kubota is justified by precision ag and brand, but the gap is now extreme

Key Risks & Catalysts

Risks

•Valuation at +2.2 SD on P/E and +2.8 SD on EV/Rev leaves no room for execution error

•Farmer net income and crop price reversal would stall large ag replacement demand

•Dealer inventory build and used equipment pricing pressure would force production cuts and discounting

•Tariff and input cost inflation compressing the 13.4% operating margin if pricing actions lag

•Financial services credit quality and retail note delinquency trends: Not disclosed, but rising delinquencies would hit the captive book

•Insider selling ($23.4m net, zero buys) and 13F holder attrition signal waning institutional conviction

•Debt/Equity of 230.3% amplifies earnings sensitivity through the financial services arm

Catalysts

•Precision ag adoption acceleration (24,000 retrofit kits, 8,000 JDLink Boost units) lifting recurring revenue mix

•Improving North American farm outlook and mid 2027 corn futures supporting large ag orders

•Continued sell side upgrades (Baird to $800, Evercore to Outperform) driving multiple support

•Margin recovery toward 15.8% operating margin expanding the EPS bridge

•Infrastructure and construction spending supporting the Construction and Forestry segment

Investment Thesis

Deere is a best in class franchise in a cyclical upswing, but the shares already discount much of the recovery. The 34.97x NTM P/E and 5.1x EV/Rev sit at historic extremes versus 2 year averages of 16.2x and 2.7x respectively, while reported net income is still declining. The bull case rests on precision ag mix shift and an improving farm economy, both credible but not yet reflected in segment margins or cash flow, which at $3.3b over nine months is modest against a $228b market cap.

The precision ag story is the most durable element: retrofit kits and satellite connectivity create an installed base annuity that smooths the equipment cycle and supports the Smart Industrial recurring revenue narrative. If operating margins track toward 15.8% and FY+2 EPS of $22.68 is delivered, the stock de rates to ~28x forward, a more defensible level. That is the crux of the thesis: earnings growth must validate the multiple.

Hold with a 12 month fair value of ~$650, roughly in line with spot and below the $731 consensus. The risk/reward is balanced: precision ag and farm recovery offer upside to $730 to $800, but the valuation premium, insider selling, and unquantified financial services credit risk cap the case. Add on a pullback toward $500 to $550, where the multiple resets closer to historical norms, and reduce exposure if large ag order trends or retail note delinquencies deteriorate.

Written by Buy Side Bro's AI analyst from financials, consensus, filings and recent news. General information only, not financial advice.

Deere & Company DE

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Executive Summary

Financial Snapshot

Forward Outlook

Valuation Analysis

Key Risks & Catalysts

Investment Thesis

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Executive Summary

Financial Snapshot

Forward Outlook

Valuation Analysis

Key Risks & Catalysts

Investment Thesis

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Bro's Verdict
Deep Dive