DEERE & CO (DE): what the price requires

At today's price, DEERE & CO (DE) is priced for +25.9% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/DE

Headline

FieldValue
TickerDE
CompanyDEERE & CO
Current price$586.37/sh
CompositionProduction agriculture 37% / Small agriculture 16% / Turf 6% / Construction 10% / Compact construction 4% / Roadbuilding 8% / Forestry 2% / Financial products 14% / Other 3%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Implied growth25.9%
Multiple paid24x operating income

Solve inputs: computed at a 9.8% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.3pp.

How unusual the bet is: elevated

ReferenceValue
vs own history+0.64σ
cohort percentile (of 225 peers)57
sustained it ~5 years at this level29%
implied end-window share0%

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset2.60x4expensive
Earnings2.94x4expensive
Relative1.88x2expensive
Growth1.11x3expensive

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.5%); the inversion above states its own rate.

Per-Model Detail (n=13)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$529.551.11xyesFCF base $6.8B, growth 5% (input: historical growth), terminal g 4.0%, WACC 8.5%, 5yr projection
DCF Exit MultipleGrowth$566.611.03xyesExit EV/EBITDA: 143.6x / 145.6x / 147.6x (bear / base = today's held flat / bull), 5yr
Relative ValuationRelative$241.862.42xyesP/E 22.56x (blended: static sector reference 18x + trailing (TTM) 33x), scenarios: 19.0x / 22.6x / 26.1x (bear / base = reference held flat / bull), EV/EBITDA 26.4x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$190.953.07xyesBV/sh $101.20, ROE (TTM) 17.5%, ke 9.3%
Two-Stage Excess ReturnAsset$258.892.26xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$448.461.31xyesRev $47.4B, growth 5% (input: historical growth; tapered), Terminal P/S: 2.8x / 3.4x / 3.9x (bear / base = today's held flat / bull, cap 8x)
Growth-Adjusted P/ERelative——no—
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$131.744.45xyesNormalized EBIT (5y avg op income, one-time charges added back) $5.28B × (1−21%) / WACC 8.5% → EPV (no growth)
Residual IncomeAsset$259.042.26xyesBV $101.20 + 5yr PV of (ROE (TTM) 17.5% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$200.422.93xyes√(22.5 × EPS $17.64 × BVPS $101.20) — Graham's conservative floor
EV/EBITDA RelativeRelative$2.04287.44xyesEBITDA $1.18B × sector EV/EBITDA 12.0x (excluded from median)
FCF YieldEarnings$216.132.71xyesFCF $6677.0M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$209.502.80xyesSBC-adj FCF $6.51B (FCF $6.68B − SBC $0.17B) capitalized at Kₑ
Ben Graham FormulaEarnings$14.7839.67xyesEPS $17.64 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median)
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative$437.531.34xyesRevenue $47.39B × sector P/S 2.5x
PEG Fair ValueRelative——no—
Earnings YieldEarnings$190.703.07xyesEPS $17.64 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$24.5b
Net debt / NOPAT (after-tax)4.96x
Net debt / operating income (pre-tax)3.92x
Share count CAGR (buyback)-3.2%
Burning cashno

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

Bull Case

Begin with the bear's strongest point, because the bull case only works if it survives it. Agriculture is deeply cyclical, and Deere is in the teeth of a downturn: Production and Precision Agriculture net sales fell 17% in fiscal 2025 to $17.3 billion, and management describes large agriculture as running below trough levels. Deere's own 10-K is blunt that "Historically, the agricultural industry has been cyclical and subject to a variety of econom"ic factors. So the fear is real. The question is whether Deere is a cyclical that gets cheap at the bottom or a compounder whose trough earnings still understate its value. The data leans toward the latter.

Even in the downturn, Deere is profitable across the cycle and diversified enough to absorb the blow. The most recent quarter showed it: diluted earnings of $6.55 per share on revenue of $13.37 billion, up nearly 7%, the fourth straight quarter of beating expectations, with Construction and Forestry surging 29% to $3.79 billion just as large agriculture softened. That is the value of a portfolio that spans farm, turf, and construction equipment: the segments do not all trough at once. Management frames the cycle position plainly, with large agriculture below trough, small agriculture and turf moving toward mid-cycle, and construction slightly above it. A business earning solid margins at the bottom of its biggest market has real earning power waiting on the other side.

The durability premium is precision agriculture, and it is what separates Deere from a commodity equipment maker. The company is building recurring, technology-driven revenue on top of the iron, citing "precise global navigation satellite systems technology, advanced connectivity and telematics, on-board sensors and computing power, automation software, digital tools" that let farmers cut inputs and lift yields. See and Spray, autonomy, and engaged-acre subscriptions turn a one-time tractor sale into an ongoing software relationship, the same razor-and-blade shift that re-rated other industrials. That is why only the growth-based valuation reaches the price while every backward-looking method says expensive: the market is paying for durable compounding the static frames cannot capture. Deere also returns capital steadily, shrinking its share count about 3% a year. The bull case is that this is a wide-moat compounder caught at a cyclical low, with a technology layer that makes the next up-cycle more profitable than the last.

Bear Case

The bear case is about which assumptions the price has baked in, and the most fragile one is that today's depressed margins snap back and then keep climbing. At the current price, the market is paying for Deere to reach operating margins around 22%, well above the roughly 13% it earns now, and to hold that elevated pace for the better part of a decade. That is a demanding bet on a cyclical. The near-term margin recovery is plausible as agriculture cycles back up, but the price is not paying for a normal up-cycle; it is paying for a structurally higher plateau that history says only about one fast-grower in five sustained even seven or eight years. The precision-agriculture story is the justification, but recurring software revenue is still a small slice of a business that mostly sells expensive machines into a volatile end market.

The cycle itself is the fragility under everything. Deere concedes its fortunes are tied to the farm economy, noting the agricultural market "is affected by various factors including commodity prices, acreage planted, crop yields, government policies, and uncertainty in macroeconomic trends" that drive farmer income and sentiment. When crop prices are weak and farm income falls, farmers defer the multi-hundred-thousand-dollar purchase of a new combine, and Deere's most profitable segment, Production and Precision Agriculture, is exactly the one most exposed. The 17% sales decline in that segment in fiscal 2025 is what that looks like, and no one can reliably time when the cycle turns. A price built on a swift, durable recovery is vulnerable to the downturn simply lasting longer than expected.

Two more pressures sit on top. Tariffs are a live headwind: management pegs the direct tariff expense run-rate at roughly $1.2 billion for fiscal 2026, equivalent to about a three-percentage-point drag on equipment-operations margins, and a one-time $272 million tariff refund flattered the most recent quarter's headline in a way that will not repeat. And the balance sheet carries roughly $24.5 billion of net debt with interest covered only about twice over, because the captive finance arm funds dealer and customer receivables. That financing book is an asset in good times and a risk in a downturn, when farm balance sheets weaken and credit losses can rise. The bear does not need Deere to be a bad company. It needs the market's assumption of a quick climb to above-cycle margins to slip, and a stock priced for that climb does not forgive a longer trough gently. The market's own reaction to the last beat, a 5% drop despite clearing estimates, shows how little patience the price has.

Valuation

The trap with a cyclical is valuing it on the wrong point in the cycle, and Deere sits near the bottom of its biggest market. At today's price the market pays about 24 times current operating income and, inverted, requires Deere to lift its operating margin from roughly 13% now toward about 22% and hold that elevated level for close to eight years. The current 13% is a downturn margin, so some recovery is reasonable to assume; the demanding part is the height of the plateau and the duration. Against history, only about one comparable fast-grower in five sustained that kind of pace that long, which is why the framework reads the priced-in assumption as elevated.

The methods we use to triangulate are unusually lopsided, and the pattern is the signal. Every backward-looking lens says richly valued: the asset methods anchored on book value, the normalized earnings-power method, and the peer-multiple comparison all land at a small fraction of the price, roughly a third to a half. Only the growth-based discounted cash-flow method reaches the price, and it does so by crediting durable forward compounding. Read honestly, that is not a stock the static frames can defend; it is a stock the market is paying a moat-and-durability premium for, on the strength of Deere's dominant position and its precision-agriculture technology layer. The premium is the entire question. If the precision-ag flywheel delivers a structurally higher-margin Deere, the growth method is right; if Deere remains a great-but-cyclical equipment maker, the backward methods are.

Solvency requires the right lens because of the captive finance arm. The roughly $24.5 billion of net debt is not corporate leverage in the usual sense; much of it funds dealer and customer financing receivables, which is why interest coverage looks thin at about twice over. The equipment-operations balance sheet is far sounder than the consolidated figure suggests, and Deere returns capital reliably, with the share count falling about 3% a year. The genuine downside risk in a deep, prolonged downturn is twofold: equipment margins compress as volumes fall, and the finance book absorbs higher credit losses as farm balance sheets weaken. The downside is bounded by a dominant franchise and real assets, not by zero. But at this price the buyer is underwriting both a cyclical recovery and a structural margin step-up, with limited cushion if only the first arrives.

Catalysts

Deere's second quarter of fiscal 2026 captured the crosscurrents in one print. Diluted EPS came in at $6.55 on revenue of $13.37 billion, up 6.7% year over year and the fourth straight quarter of beating consensus, even as large agriculture kept softening. The internal divergence was stark: Production and Precision Agriculture sales fell 14% to $4.50 billion with margins compressing to 15.7%, while Construction and Forestry surged 29% to $3.79 billion at a 14.8% margin. That split is the portfolio doing its job, with construction offsetting part of the farm downturn.

Two items shaped the quality of the beat. A $272 million recovery tied to the Supreme Court's invalidation of the IEEPA tariffs flowed through production costs as a one-time tailwind, so the headline overstated the underlying run-rate. At the same time, Deere's direct tariff expense for fiscal 2026 is unchanged at roughly $1.2 billion, about a three-percentage-point headwind on equipment-operations margins. Management maintained full-year fiscal 2026 net income guidance of $4.5 billion to $5.0 billion and characterized the cycle as large agriculture below trough, small agriculture and turf approaching mid-cycle, and construction slightly above it, with agriculture expected to bottom in 2026.

The market's reaction is itself the catalyst worth noting: despite clearing both EPS and revenue estimates, the stock fell more than 5%, as investors discounted the tariff-refund boost and focused on the unresolved depth and duration of the farm downcycle. That tells you what the next several quarters hinge on. The data points that matter are confirmation that agriculture is genuinely bottoming, the trajectory of Production and Precision Agriculture margins as volumes stabilize, and whether the tariff drag eases. A clear cyclical bottom is the bull's catalyst; a deeper or longer trough is the bear's.

Peer Cohorts (Per Segment, With Filing Citations)

Production and Precision Agriculture (reported)

Small Agriculture and Turf (reported)

Construction and Forestry (reported)

Financial Services (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Q2 fiscal 2026 earnings, May 2026 · Q2 fiscal 2026 earnings · Q2 fiscal 2026 market reaction

View the full interactive DE report on boothcheck