DE: Precision Ag Subscriptions Will Drive Future Earnings Recovery Despite Cyclical Headwinds

Analysts have modestly raised their price target on Deere to approximately $540 from about $535, reflecting increased confidence in the long term earnings power from its expanding Precision Ag subscription base and data enabled ecosystem, even as they acknowledge a near term cyclical downturn and a mixed demand backdrop.

Analyst Commentary

Recent Street research on Deere reflects a generally constructive stance on the shares, with analysts emphasizing the company’s growing Precision Ag subscription base, data driven offerings, and potential earnings recovery as key drivers of long term value, even as they flag near term cyclical and inventory related risks.

Bullish Takeaways

• Bullish analysts highlight the rapid expansion of Deere’s installed base of subscription retrofit Precision Ag products, viewing this as a structural driver of higher recurring revenue and more resilient margins.
• Increased adoption of data enabled and connectivity solutions is seen as deepening Deere’s ecosystem, strengthening customer lock in, and supporting a premium valuation multiple versus more cyclical peers.
• Substantial investment in technology and R&D is framed as reinforcing Deere’s competitive moat, enabling sustained unit profitability growth as the Precision Ag portfolio scales.
• Some bullish analysts argue that agriculture fundamentals and sentiment are already near a trough, suggesting that the market will begin to price in a positive earnings inflection ahead of an expected recovery.

Bearish Takeaways

• Bearish analysts remain cautious on the mixed cyclical backdrop, pointing to elevated used equipment inventories that could weigh on new equipment demand and limit near term upside to estimates.
• There is concern that expectations for a 2027 recovery may already be partially embedded in the stock, leaving less room for multiple expansion if the earnings rebound is slower than anticipated.
• Some see risk that investors may be early in positioning for the upcycle, given that the earnings downturn is expected to persist through 2026, which could introduce volatility if macro or ag fundamentals weaken further.
• Questions remain around how quickly Precision Ag monetization can offset cyclical pressure in core machinery, which may cap near term valuation re rating despite the long term growth narrative.

What's in the News

• The U.S. Department of Agriculture and the Department of Justice launch a joint antitrust probe into crop input suppliers, pressuring shares of major ag names including Deere (Bloomberg).
• Deere schedules an Analyst and Investor Day, where management is expected to update its long term strategy around Precision Ag, capital allocation, and cycle positioning (company event filing).
• Deere issues new full year 2026 earnings guidance, projecting net income attributable in a range of $4.0 billion to $4.75 billion and framing expectations for the next leg of the cycle (company guidance).

Valuation Changes

• The Fair Value Estimate has edged down slightly to approximately $525.41 from about $525.78, reflecting a modest reduction in long term intrinsic value assumptions.
• The Discount Rate has risen marginally to about 9.63 percent from roughly 9.61 percent, indicating a slightly higher required return in the updated valuation framework.
• Revenue Growth has been revised down significantly, shifting from an expected increase of roughly 0.29 percent to a projected decline of about 1.38 percent, signaling a more cautious outlook on top line trends.
• The Net Profit Margin has been reduced to around 16.01 percent from about 17.41 percent, implying a more conservative view on Deere’s future profitability levels.
• The Future P/E has increased to approximately 26.24x from around 23.70x, suggesting a higher valuation multiple being applied despite slightly softer fundamental assumptions.