Precision Farming Advances Will Drive Cycle Recovery Despite Headwinds

Deere's analyst price target was revised slightly lower to approximately $524.95. This modest decrease reflects analysts' cautious outlook on near-term agriculture fundamentals, tariff impacts, and expectations for a longer earnings recovery cycle, balanced by ongoing innovation and the company's strong market position.

Analyst Commentary

Recent street research reflects a nuanced view on Deere, with analysts weighing both the company's innovation and ongoing headwinds. While some are optimistic about the firm’s strategic investments and market opportunities, others remain cautious due to industry and macroeconomic challenges.

• Bullish analysts highlight Deere's significant investment in technology and R&D. They note these initiatives expand its ecosystem, deepen customer reliance, and reduce earnings cyclicality over time.
• Resilience in channel inventory management is evident, particularly through notable reductions in North American tractor and combine inventories. This signals disciplined execution and positions the company for recovery when demand improves.
• Positive inflection points are expected in 2026 to 2027. Fundamentals and sentiment are seen as near cycle lows and projected to turn upward, which could drive multiple expansion and valuation upside.
• Growth prospects in fiscal 2026 are supported by anticipated improvements in biofuels policy, success in used equipment merchandising, and signs that earnings are poised to inflect from a current trough.

• Bearish analysts point to ongoing global headwinds in agricultural equipment, with a significant downturn pressuring near-term results for Deere and its peers.
• Recent adjustments to Section 232 tariffs, including higher tariffs on steel and aluminum content, are expected to increase costs and dampen profitability. This has led some to lower price targets.
• Analysts caution that it may be too early to anticipate a broad recovery. Investor expectations for 2026 remain elevated and earnings growth could be slower than some forecasts suggest.
• While the U.S. remains a source of relative strength, softness in other regions adds risk to Deere’s execution and earnings trajectory.

What's in the News

• The U.S. Department of Agriculture and Department of Justice plan to investigate suppliers of crop inputs, including seeds and fertilizers, for potential antitrust violations. This news has led to a decline in shares of Deere and other industry peers (Bloomberg).
• Deere reports that U.S. tariffs on steel and aluminum are expected to result in $300 million in additional costs by year-end, while lower crop prices are reducing farmers' willingness to purchase new equipment (New York Times).
• There is increasing speculation about Berkshire Hathaway's "mystery stock," with Deere assigned a 10% chance of being Warren Buffett's undisclosed industrial investment, according to market commentators (MarketWatch).

Valuation Changes

• Consensus Analyst Price Target: Decreased marginally from $525.66 to $524.95, reflecting a slight adjustment in analysts' expectations.
• Discount Rate: Edged down from 9.47% to 9.45%, suggesting a minor decline in perceived risk or cost of capital.
• Revenue Growth: Lowered from 30.85% to 28.70%, indicating a more cautious outlook for future top-line expansion.
• Net Profit Margin: Decreased slightly from 17.47% to 17.43%, pointing to a modest reduction in expected profitability.
• Future P/E Multiple: Increased marginally from 23.51x to 23.54x, which signals a subtle rise in valuation expectations based on projected earnings.