Precision Agriculture And Automation Will Boost Global Reach

Deere's analyst price target has been modestly reduced to approximately $525 from $533. Analysts cite updated tariff headwinds, along with softening revenue growth and profit margin projections, in their revised outlooks.

Analyst Commentary

Analysts remain closely divided in their outlook for Deere, with ongoing tariff pressures and sector dynamics shaping valuation changes and expectations across the investment community.

• Bullish analysts see potential for earnings growth and multiple expansion as industry conditions stabilize. Select regions, such as the U.S., show stronger demand and improved inventory positions.
• Recent quarterly results demonstrated resilience in smaller agriculture and turf segments. Favorable production costs have helped offset some tariff burdens, and demand has exceeded expectations in certain categories.
• Optimistic expectations for 2026 are driven by projections of better North American harvests, policy clarity in biofuels, and success in the used equipment market. These factors support upward revisions at the high end of consensus estimates.
• Ongoing channel inventory reductions, notably in large tractors and combines, are viewed as a positive indicator for future market health and improved execution.

• Bearish analysts have moderated expectations due to the significant expansion of steel and aluminum tariffs. The impact has become more pronounced as costs escalate for agriculture and construction equipment manufacturers.
• Softening revenue growth and compressed profit margins, driven by both ongoing tariff exposure and a downturn in global agricultural equipment demand, have led to reduced price targets and more cautious sector outlooks.
• The international market continues to face persistent headwinds. While some U.S. segments remain resilient, global exposure limits the company's ability to fully mitigate softness abroad.
• Uncertainty remains around the ultimate effect of new tariffs on input costs and downstream pricing. This may continue to cap valuation upside in the near term until earnings inflection is more visible.

What's in the News

• The U.S. Department of Agriculture and Department of Justice are investigating suppliers of crop inputs, including seeds and fertilizers, for potential antitrust violations. Shares of major agricultural companies, including Deere, moved lower following the report (Bloomberg).
• Deere continues to be impacted by increased tariffs and lower crop prices. Higher steel and aluminum tariffs have cost the company $300 million so far, with another $300 million impact forecasted by year-end. Tightened farmer budgets are reducing equipment purchases (The New York Times).
• There is speculation about major industrial investments by Warren Buffett's Berkshire Hathaway, with Deere being considered as a possible candidate for the so-called "mystery stock." Caterpillar is also seen as a frontrunner (MarketWatch).

Valuation Changes

• Consensus Analyst Price Target has decreased slightly from approximately $533 to $525 per share.
• Discount Rate has risen slightly, moving from 9.25% to 9.47%. This reflects updated risk assessments.
• Revenue Growth projections have fallen significantly, dropping from 0.66% to 0.31%.
• Net Profit Margin is now expected to be 17.47%, compared to the previous estimate of 19.02%.
• Future P/E (Price to Earnings) ratio has increased from 21.1x to 23.5x. This indicates revised expectations for future earnings multiples.