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Deterministic models signal a material divergence from internal valuation cross-checks expectations.
The street is pricing Deere as a durable ag-tech compounder rather than a legacy cyclical industrial.
Deere is a best-in-class cyclical manufacturer currently navigating a downcycle following its 2023 peak. The company's structural advantage lies in its Precision Agriculture technology, which drives higher margins and recurring software-like revenue, softening the blow of traditional agricultural equipment replacement cycles.
Deere is a best-in-class cyclical manufacturer currently navigating a downcycle following its 2023 peak. The company's structural advantage lies in its Precision Agriculture technology, which drives higher margins and recurring software-like revenue, softening the blow of traditional agricultural equipment replacement cycles.
Precision Agriculture software and autonomous technology integration.
Unmatched dealer network creating high switching costs.
The street is pricing Deere as a durable ag-tech compounder rather than a legacy cyclical industrial.
Sell. The market has capitalized peak cycle margins, ignoring the reality of the impending agricultural equipment downturn.
Deere & Company engages in the manufacture and distribution of various equipment worldwide. The company operates through four segments: Production and Precision Agriculture, Small Agriculture and Turf, Construction and Forestry, and Financial Services. The Production and Precision Agriculture segment provides four-wheel-drive track and row crop tractors, harvesters, cotton pickers and strippers, sugarcane harvesters and loaders, soil preparation, tillage, seeding, and crop care equipment, as well as application equipment, including sprayers and nutrient management, soil preparation machinery, and related attachments and service parts. The Small Agriculture and Turf segment offers specialty, utility, and compact tractors; self-propelled forage harvesters and attachments; rotary mowers, hay and forage equipment, and utility vehicles; turf and utility equipment, including riding lawn, commercial mowing, and golf course equipment, and utility vehicles, as well as implements for mowing, tilling, snow and debris handling, aerating, residential, commercial, golf, and sports turf care applications. The Construction and Forestry segment provides backhoe loaders, crawler dozers and loaders, four-wheel-drive loaders, excavators, motor graders, articulated dump trucks, skid-steer loaders, milling machines, recyclers, slipform and asphalt pavers, surface miners, compactors, tandem, static rollers, mobile crushers and screens, mobile and stationary asphalt plants, and log harvesters; and road building and rehabilitation equipment. The Financial Services segment finances sales and leases agriculture and turf, and construction and forestry equipment. It also offers wholesale financing to dealers of the foregoing equipment; and extended equipment warranties. Deere & Company has a strategic partnership with Tarter USA to develop and produce flex wing rotary cutters. The company was founded in 1837 and is headquartered in Moline, Illinois.
A prolonged depression in crop prices coupled with sustained high interest rates crushes farmer sentiment, leading to an extended trough in equipment replacement cycles and rising defaults in the Financial Services segment.
Precision Agriculture software and autonomous technology integration.
Unmatched dealer network creating high switching costs.
Strong brand equity built over a century.
Economic profit is supported when reported returns exceed the company cost-of-capital hurdle.
Unavailable
FCFF DCF remains positive at the base case: base FCFF $7.1B after capex $2.7B, with terminal value at 60.5% of enterprise value. No FCF cliff is projected unless capex/ or materially resets.
If revenue misses internal valuation cross-checks further, expect multiple compression. If margins hold despite lower volume, the SaaS thesis survives.
If revenue misses internal valuation cross-checks further, expect multiple compression. If margins hold despite lower volume, the SaaS thesis survives.
If revenue misses internal valuation cross-checks further, expect . If margins hold despite lower volume, the SaaS thesis survives.
Currently entering the contraction phase after a strong peak in 2023, normalizing capital expenditures to reflect trough dynamics.
High crop prices and strong farmer cash flows accelerate fleet replacement and precision tech upgrades.
Depressed agricultural commodity prices and high financing costs lead to deferred equipment purchases.
Currently entering the contraction phase after a strong peak in 2023, normalizing capital expenditures to reflect trough dynamics.
Avoid long positions; consider short exposure given the extreme overvaluation and cyclical downside.
Take profit as valuation nears $350 or if agricultural commodity prices abruptly surge.
The street is pricing Deere as a durable ag-tech compounder rather than a legacy cyclical industrial.
Our primary DCF anchors on normalized cash generation, yielding a $366 base.
Sell. Rating follows fair-value gap plus hard gates.
Upside case: Deterministic models signal a material divergence from internal valuation cross-checks expectations. Downside case: The street is pricing Deere as a durable ag-tech compounder rather than a legacy cyclical industrial.
Capture your own thesis, position size, and follow-up questions. Stays on this device, only you can see it.
A prolonged depression in crop prices coupled with sustained high interest rates crushes farmer sentiment, leading to an extended trough in equipment replacement cycles and rising defaults in the Financial Services segment.
Global crop surpluses suppress prices for multiple years, removing farmer incentive to upgrade equipment fleets.
High interest rates cause widespread defaults among highly leveraged agricultural and construction clients, creating severe balance sheet distress.
Competitors rapidly replicate Deere's software moat, eliminating the expected SaaS premium entirely and returning the company to historical multiples.
The five developments that would weaken our investment case.
Accelerating top-line declines indicate that agricultural equipment demand is entering a severe cyclical trough. As retail order backlogs shrink and farmers defer major fleet purchases, manufacturing capacity utilization drops, creating severe operating deleverage across global production facilities.
Current:-11.6% for the period ended 2025-10-31
Alert ifDecline below -20.0% over any trailing twelve-month period
A steep erosion in operating profitability indicates rising credit provision expenses and higher dealer financing support costs. If customer credit distress intensifies, credit losses in the captive financing arm absorb core industrial cash flows and constrain consolidated balance sheet flexibility.
Current:18.8% for the period ended 2025-10-31
Alert ifDecline below 14.0% over any trailing twelve-month period
A sharp contraction in per-share earnings reflects severe volume contraction and pricing pressure across large agriculture markets. Diminishing earnings power compresses market valuation multiples and limits management's capacity to execute planned share repurchases and strategic growth investments.
Current:18.5 for the period ended 2025-10-31
Alert ifDecline below 12.0 for any trailing twelve-month period
Shrinking gross margins suggest that software-driven precision agriculture solutions are failing to command expected pricing premiums against commoditized alternatives. Failure to monetize high-margin recurring technology features reduces structural gross margin resilience and impairs the long-term margin expansion thesis.
Current:36.5% for the period ended 2025-10-31
Alert ifDecline below 30.0% over any trailing twelve-month period
Elevated used inventory on dealer lots stifles new machinery deliveries and forces heavier discounting and wholesale promotional allowances. This inventory stagnation ties up capital, suppresses capital productivity, and reduces returns generated on deployed assets below cost-of-capital hurdles.
Current:8.3% as of the 2026-05-09 analysis date
Alert ifDecline below 6.0% over any trailing twelve-month period
Each lens answers a different valuation question. Only included lenses set Fair value; floors and diagnostics provide context.
Apply a terminal P/E to the dated forward EPS path, then discount that future share value back to the analysis date.
Convert the revenue and margin path into after-tax free cash flow, discount the annual per-share amounts and at , then adjust for signed per current share.
Add depreciation to net income, subtract maintenance capex, divide by diluted shares, and apply a normalized valuation multiple.
Solve for the growth rate that makes the model value equal the report-date share price.
Accelerated adoption of autonomous farming and precision agriculture software expands software-as-a-service (SaaS) revenues, structurally lifting mid-cycle margins and commanding a higher multiple from the market.
Deere navigates a standard agricultural downcycle, with revenues contracting in the near term before recovering. Precision Ag limits margin deterioration, but the valuation reverts to a historical cyclical multiple of 15x.
If revenue misses internal valuation cross-checks further, expect multiple compression. If margins hold despite lower volume, the SaaS thesis survives.
Warning level: Decline below -20.0% over any trailing twelve-month period. Accelerating top-line declines indicate that agricultural equipment demand is entering a severe cyclical trough. As retail order backlogs shrink and farmers defer major fleet purchases, manufacturing capacity utilization drops, creating severe operating deleverage across global production facilities.
Warning level: Decline below 14.0% over any trailing twelve-month period. A steep erosion in operating profitability indicates rising credit provision expenses and higher dealer financing support costs. If customer credit distress intensifies, credit losses in the captive financing arm absorb core industrial cash flows and constrain consolidated balance sheet flexibility.
Warning level: Decline below 12.0 for any trailing twelve-month period. A sharp contraction in per-share earnings reflects severe volume contraction and pricing pressure across large agriculture markets. Diminishing earnings power compresses market valuation multiples and limits management's capacity to execute planned share repurchases and strategic growth investments.
Warning level: Decline below 30.0% over any trailing twelve-month period. Shrinking gross margins suggest that software-driven precision agriculture solutions are failing to command expected pricing premiums against commoditized alternatives. Failure to monetize high-margin recurring technology features reduces structural gross margin resilience and impairs the long-term margin expansion thesis.
Warning level: Decline below 6.0% over any trailing twelve-month period. Elevated used inventory on dealer lots stifles new machinery deliveries and forces heavier discounting and wholesale promotional allowances. This inventory stagnation ties up capital, suppresses capital productivity, and reduces returns generated on deployed assets below cost-of-capital hurdles.
| $60.25B |
| $50.52B |
| $44.67B |
| -4.5% |
| Gross profit | $15.73B | $22.31B | $19.50B | $16.30B | +1.2% |
| Operating income | $10.19B | $15.47B | $12.55B | $9.43B | -2.6% |
| Net income | $7.13B | $10.17B | $7.10B | $5.03B | -11.0% |
| EPS (diluted) | $23.28 | $34.63 | $25.62 | $18.50 | -7.4% |
| EBITDA | $12.08B | $17.48B | $14.67B | $11.66B | -1.2% |
| R&D | $1.91B | $2.18B | $2.29B | $2.31B | +6.5% |
| SG&A | $3.65B | $4.31B | $4.51B | $4.24B | +5.2% |
Capital allocation should be evaluated against reinvestment needs, balance-sheet strength, and shareholder returns.
| Revenue | 44,665,000,000 |
|---|---|
| Cost of revenue | 28,370,000,000 |
| Gross profit | 16,295,000,000 |
| Operating expenses | 7,879,000,000 |
| Operating income | 8,416,000,000 |
| Non-operating items and tax | -3,389,000,000 |
| Net income | 5,027,000,000 |
| Total assets | 105,996,000,000 |
|---|---|
| Cash | 8,276,000,000 |
| Current assets | 74,902,000,000 |
| Total liabilities | 79,989,000,000 |
| Current liabilities | 32,455,000,000 |
| Shareholders’ equity | 25,950,000,000 |
Point-in-time financial data used in the 2026-05-09 analysis.
| Period | Revenue | EBITDA | Net income | Operating cash flow | Free cash flow | Capex | Depreciation and amortization | Stock-based compensation | Share repurchases | Dividends paid | Net debt issuance | Investing cash flow | Financing cash flow | Beginning cash | Ending cash | Cash and investments | Total debt | Operating margin | ROIC | WACC | ROIC − WACC spread |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022-10-31 | 51.3B | 12.1B | 7.1B | 4.7B | 911M | 3.8B | 1.9B | 85M | 3.6B | 1.3B | 5.8B | — | — | — | — | 4.8B | 52.2B | 17.6% | — | 6.7% | — |
| 2023-10-31 | 60.2B | 17.5B | 10.2B | 8.6B | 4.1B | 4.5B | 2B | 130M | 7.2B | 1.4B | 11.5B | — | — | — | — | 7.5B | 63.7B | 24.2% | — | 7.1% | — |
| 2024-10-31 | 50.5B | 14.7B | 7.1B | 9.2B | 4.4B | 4.8B | 2.1B | 208M | 4B | 1.6B | 3B | — | — | — | — | 7.3B | 65.5B | 22.6% | — | 6.4% | — |
| 2025-10-31 | 44.7B | 11.7B | 5B | 7.5B | 3.2B | 4.2B | 2.2B | 151M | 1.1B | 1.7B | -1.6B | — | — | — | — | 8.3B | 64.3B | 18.8% | — | 6.8% | — |
DE trades at 25.0x forward earnings against a peer median of 30.6x; EV/EBITDA of 22.7x against a peer median of 29.1x; 6 peers.
| Level | Action |
|---|---|
| Thesis break | Take profit as valuation nears $350 or if agricultural commodity prices abruptly surge. |
| PACCAR Inc. |
| 16.9x |
| 2.2x |
| 20.7x |
| 13.1% |
| 10.3% |
| GE | GE Aerospace | 34.3x | 6.4x | 29.1x | 45.4% | 20.2% |
| GEV | GE Vernova Inc. | 42.5x | 7.1x | 80.4x | 75.7% | 5.5% |
| RTX | RTX Corporation | 23.3x | 2.6x | 17.8x | 11.6% | 13.2% |
