# Deere & Company (DE) — InvestMoat Analysis

_Last analyzed: May 2026_
_Asset class: equity · Canonical page: https://investmoat.com/stocks/de_

## Scores

| Dimension | Score (0–100) |
| --- | --- |
| Moat durability | 81 |
| Growth trajectory | 61 |
| Valuation | 70 |
| **Composite** | **69** |
| **Recommendation** | **Hold** |

Scores are computed deterministically from this asset’s data by the InvestMoat formula (see https://investmoat.com/llms.txt for methodology). Scores are not directly comparable across asset classes.

## Key stats

- **Ticker:** DE
- **Market Cap:** ~$130B

## Moat

Dominant North American farm equipment franchise with the largest agricultural dealer network and a credible precision-ag software franchise — durable but cyclical, with farmer balance sheets currently soft.

### The Dealer-Plus-Software Moat

Deere's moat is **the largest agricultural dealer network in the West paired with a growing precision-ag software franchise** — durable on hardware, with optionality on software:

- **Dealer Network Density:** Deere's North American dealer footprint is unmatched — closer to farms, faster service, and parts availability that competitors (CNH, AGCO, Kubota) cannot match in core US/Canadian markets. Switching tractor brands means losing service proximity, which is a first-order farmer concern in season.
- **Precision Ag Software Optionality:** John Deere Operations Centre + See & Spray + autonomous tractors are real software franchises with ~$1B ARR run-rate growing 30%+. The recurring-revenue layer compounds on the installed base of ~750K connected machines and is a meaningful moat extension if execution holds.
- **Cyclical Discipline:** Through-cycle margin discipline (operating margin ~14-22%) and capital return have been industry-leading. Deere's mid-cycle through-cycle margin floor of ~16% holds even in farmer-soft cycles like FY25-26 — better than CNH/AGCO.

**Moat verdict:** Deere is a high-quality industrial-AI franchise — autonomous farming and computer vision (See & Spray) compound the moat. The thesis question is cyclical (farmer balance sheet) not technological. AI is structurally additive.

## Growth

FY26 EPS guide $22-25, recovering modestly from FY25 trough. Farmer balance sheets remain soft on grain prices; the cyclical recovery is back-end-loaded into FY27. Long-term thesis is precision ag software ARR + autonomous farming TAM expansion against cyclical hardware base.

- **Revenue CAGR estimate:** 5-8%
- **Primary type:** market share
- **Margin trend:** stable
- **Key risk (moderate):** If farmer income remains depressed through 2026-27 due to sustained low grain prices and high input costs, the equipment replacement cycle delays further and Deere's earnings power compresses to $20 EPS, triggering a multiple compression to 13-14×.
- **Drivers:**
  - Agriculture & Turf — Trough cycle FY25-26; recovery dependent on grain prices and farmer income (decelerating)
  - Construction & Forestry — Tied to non-residential construction cycle; mixed (stable)
  - Precision Ag Software ARR — $1B run-rate growing 30%+; subscription mix shift in progress (accelerating)
- **Score derivation:** Base 65 (4-8% CAGR top of band) + 5 precision ag ARR optionality (30%+ growth) - 5 cyclicality (FY25-26 trough) - 5 farmer balance sheet (grain prices weak) = 60

## Valuation

At ~$485 Deere trades at ~21× trough FY26 EPS — premium reflecting precision-ag software optionality, but the cyclical pattern argues for waiting for through-cycle multiple. Through-cycle valuation is more like 14-16× normalised earnings.

| Multiple | Value | Note |
| --- | --- | --- |
| Forward P/E (FY26) | ~21× | EPS ~$23 mid; trough cycle valuation |
| Forward P/E (FY27) | ~16× | Assumes recovery to $30 EPS |
| Price / Sales (NTM) | ~3× | Premium reflecting software mix |
| PEG Ratio | ~3× | Reflects through-cycle CAGR not trough |
| FCF Yield | ~3% | FCF compressed; recovers with cycle |

Valuation prices in cyclical recovery and software optionality. Margin of safety is modest at current levels. _(as of May 2026)_

## Price scenarios

### Bear — $370

Farmer income stays soft through 2027, equipment cycle bottom delays, multiple compresses to 14× depressed earnings.

- Grain prices remain low through 2027; farmer income stays below long-term average
- Equipment replacement cycle delays into 2028, deferring revenue recovery
- Precision ag software ARR growth slows below 20% on slower hardware install base

### Base — $540

Cyclical recovery in FY27 drives EPS to $30, precision ag ARR continues compounding, multiple sustains 18×.

- Grain prices recover modestly in 2026-27, farmer income normalises
- FY27 EPS reaches $30 on volume + price + cost discipline
- Precision ag ARR exceeds $1.4B run-rate by FY27

### Bull — $680

Cyclical recovery + autonomous tractor commercial launch drives premium multiple expansion to 22×, FY28 EPS reaches $35+.

- Autonomous tractor commercial deployment accelerates in 2026-27
- Precision ag ARR surpasses $2B by FY28 with 90%+ gross margins
- Capital return increases as cycle EBITDA recovers above 25%

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