DE Deere Stock Outlook 2026: Betting on the Ag Cycle Trough

Deere’s earnings cycle from 2021 to 2025 is a textbook case study in agricultural sector investing. EPS ran from $18.99 (FY2021) to a peak of $34.63 (FY2023) and back down to $18.50 (FY2025) in just four years. Revenue peaked at $61.3B in FY2023 and fell 25% to $45.7B by FY2025.

The question for 2026 is not whether a trough occurred — it clearly did. The question is whether FY2025 was the bottom, or whether FY2026 brings another leg down before the cycle turns. The answer depends almost entirely on farm income, which depends on corn and soybean prices, global demand, and Brazilian production.

Our view: FY2025 is likely the trough for EPS, but the recovery to FY2023 peak levels is a 2027–28 story, not 2026. The stock’s current forward P/E of 30.9x reflects this — the market is paying for cycle recovery, not for current earnings. That’s not cheap, but it’s not unreasonable for a blue-chip industrial with improving software recurring revenue.

Key Metrics (May 2026)

Metric	Value (approx.)
Stock Price	~$580.54
Market Cap	~$156.8B
52-Week Range	$433.00 – $674.19
Trailing P/E	32.7x
Forward P/E	~30.9x
Dividend	$6.48 (yield ~1.1%)
Revenue FY2025	$45.7B (-11.6% YoY)
Net Income FY2025	$5.0B (-29.2% YoY)
Analyst Consensus Target	~$632.56

Figures are approximate and change daily. Verify before trading.

For the construction and mining side of the industrial cycle, see our CAT Caterpillar Stock Outlook 2026.

Business Segments: Where the Pain Is Concentrated

Deere operates three reportable segments:

Segment	Key Products	Revenue Share (est.)	Cycle Sensitivity
Production & Precision Ag (P&PA)	200+ HP tractors, combines	~40%	Highest
Small Ag & Turf (SA&T)	Sub-200 HP tractors, turf equipment	~25%	Moderate
Construction & Forestry (C&F)	Excavators, dozers, logging	~35%	Moderate

The P&PA segment drove this downcycle. A large combine (over 100 feet wide, GPS-guided, with AI yield mapping) costs $500,000–$700,000+. When corn prices drop and farm income falls, farmers delay these purchases for 1–3 years. That’s exactly what happened in FY2024–25.

SA&T and C&F held up better, partially explaining why operating margins compressed from 25% to 20% rather than collapsing to the 12–15% seen in the 2015–16 ag downturn.

Financial History: The Cycle in Numbers

Fiscal Year	Revenue	Net Income	EPS	Operating Margin
FY2021	$44.0B	$6.0B	$18.99	19.5%
FY2022	$52.6B	$7.1B	$23.28	19.4%
FY2023	$61.3B	$10.2B	$34.63	25.3%
FY2024	$51.7B	$7.1B	$25.62	24.3%
FY2025	$45.7B	$5.0B	$18.50	20.6%

Note the gross margin trajectory: 33.9% (FY2021) → 38.4% (FY2023) → 38.4% (FY2025). Gross margins held remarkably well as revenue fell, a sign of pricing power and improved business mix. Dividend per share has risen every year — $3.61 (FY2021), $4.36 (FY2022), $5.05 (FY2023), $5.88 (FY2024), $6.48 (FY2025) — demonstrating Deere’s commitment to shareholder returns through the cycle.

The Ag Cycle: Reading USDA’s Tea Leaves

Farm income is the single most important leading indicator for Deere’s equipment demand, and farm income follows commodity prices.

The 2022–23 commodity boom drove U.S. net farm income to record levels (~$170–180B annually), fueling the equipment supercycle. The 2024–25 correction brought corn prices from $7+/bushel to $4.0–4.5 and soybeans from $15+ to $9–10, shrinking farm income by 20–30%.

Key recovery signals to watch:

1. U.S. net farm income recovering above $130B annually
2. Used large tractor auction prices stabilizing (currently declining more slowly)
3. Brazil soybean prices and BRL/USD stability
4. China resuming meaningful soybean imports from the U.S.

USDA’s 2025 baseline projections suggested modest improvement in 2026, with corn acreage expanding and prices gradually recovering. But the projections carry wide confidence intervals and are sensitive to South American production. The honest answer: the trough thesis is plausible but not yet proven by data.

Precision Ag: The Software Layer That Changes the Cycle Math

Deere’s structural shift from pure hardware to a platform business is real and meaningful — though still early.

See & Spray Ultimate: Camera-equipped sprayers with machine vision identify weeds vs. crops at speed, spraying herbicide only where needed. In trials, it reduces herbicide application by up to 77%, generating immediate ROI for farmers. This technology creates genuine switching costs once a farmer integrates it with their operation data.

John Deere Operations Center (JDOC): Cloud platform collecting real-time data from machines in the field. Farmers subscribe to planning, planting optimization, and predictive maintenance features. As of 2025, millions of connected machines feed data into this ecosystem.

Why this matters for investors: Recurring software revenue is not cyclical in the same way as hardware. A farmer who paid for See & Spray integration is unlikely to cancel the software subscription even when not buying new equipment. Analysts estimate this software/subscription layer could reach 10–15% of Deere’s total revenue by 2030, providing a structural floor to earnings through the next downcycle.

Compare this to how Caterpillar is monetizing data from its Cat Connect telematics platform — see CAT Caterpillar Stock Outlook 2026 for details.

For income-oriented exposure while waiting for cycle recovery, consider SCHD Dividend ETF Guide 2026 or VYM vs SCHD Dividend Comparison 2026 as portfolio ballast alongside DE’s cyclical exposure.

Right-to-Repair: Resolution and Implications

Deere has faced sustained criticism for using proprietary software locks to prevent independent repair shops from servicing equipment. This forced farmers to use authorized dealers — often far away — for critical repairs during planting and harvest seasons when every day counts.

The controversy escalated politically, with multiple state legislatures passing right-to-repair laws and the FTC scrutinizing the practice.

Late 2025 settlement: Deere reached an agreement with the American Farm Bureau Federation and other major farming organizations to:

• Provide independent repair shops access to diagnostic tools and software
• Supply parts documentation more broadly
• Create a path for owner-led repairs on certain systems

Investment implications:

• Legal/regulatory overhang reduced — removes a stock discount factor
• Modest near-term headwind to dealer service revenue (which carries high margins)
• Builds goodwill with farmer customers who felt locked in
• Sets a precedent but Deere retains meaningful proprietary advantage in software complexity

DE vs. CAT: Which Industrial Do You Buy?

Metric	DE (Deere)	CAT (Caterpillar)
Primary Market	Agricultural machinery (65%+)	Construction, mining, energy
Cycle Driver	Farm income / crop prices	Infrastructure spend, commodity mining
Dividend Yield	~1.1%	~1.6%
FY2025 Op. Margin	20.6%	High (maintained better)
China Exposure	Indirect (via soy exports)	Direct (construction equipment)
Technology Focus	Precision ag SaaS	Autonomous mining equipment
Valuation	Pricier on current earnings	Pricier on recent vs. trough earnings

Both are blue-chip industrials, but their cycles run on different clocks. In 2026, Caterpillar benefits from infrastructure spending tailwinds while Deere is still in the downcycle. A 2027–28 rotation into Deere as the ag cycle recovers while construction moderates is a plausible positioning strategy.

For emerging market industrial exposure, see Doosan Bobcat Stock Outlook 2026 and Hyundai Rotem Stock Outlook 2026.

12-Month Price Scenarios

Bull Case: $680–$720

• USDA confirms U.S. net farm income recovery toward $140B+ in 2026
• Used large tractor inventory clears; new order books strengthen into H2 2026
• Precision ag subscriptions grow 40%+ YoY, demonstrating durable software moat
• Market begins pricing FY2027 EPS of $28–30, supporting 24–26x forward multiple
• May 21 Q2 FY2026 earnings show orders stabilizing or improving

Base Case: $620–$650

• FY2026 EPS recovers modestly to ~$19–21
• Ag cycle trough confirmed but recovery pace is gradual
• Precision ag software provides margin floor; gross margins stay near 38%
• Stock trades at ~30x FY2027 estimated earnings of $22–25
• Analyst consensus target of ~$633 acts as near-term magnet

Bear Case: $480–$510

• FY2026 earnings come in below FY2025 — no trough yet
• Brazil soybean production surge and China demand weakness extend the cycle
• John Deere Financial sees rising delinquencies as farm cash flows deteriorate
• Used equipment inventory remains elevated through 2026
• Market reprices DE to 20–22x depressed FY2026 earnings

Tax Considerations for US Investors

Deere’s $6.48 annual dividend ($1.62 quarterly) qualifies as a qualified dividend, taxed at 0/15/20% depending on income. The dividend payout ratio is moderate — Deere grew the dividend even as earnings fell, signaling management confidence.

Capital gains profile: With DE’s low 1.1% yield, the dominant return driver is stock price appreciation. In a taxable account, holding DE through the cycle creates long-term capital gains if held more than 12 months. Tax-loss harvesting in 2024–25 (if you bought near highs) could offset gains elsewhere in the portfolio.

401k and IRA: Ideal accounts for holding DE given the cyclical nature — no tax drag during the accumulation phase, and the eventual recovery gain compounds untaxed until withdrawal.

Risks to the Recovery Thesis

1. Ag cycle delay: If corn prices stay below $4.50 and soy below $10 through 2026, the farmer income recovery needed to trigger equipment demand doesn’t materialize.
2. Used inventory overhang: The 2020–22 order boom created excess used inventory that continues to suppress new purchases in some regions.
3. Brazil competition: Brazilian agricultural equipment makers (Stara, Jacto) and subsidized financing programs make local competition stiffer.
4. EV/autonomous R&D costs: Developing electric tractors and fully autonomous farming systems requires capital expenditure that will weigh on free cash flow in the near term.
5. China trade dynamics: While Deere’s direct China exposure is limited, any escalation in U.S.–China soybean trade conflict indirectly hurts U.S. farm income.
6. Interest rate persistence: Higher rates increase farmer borrowing costs through John Deere Financial, slowing equipment purchases even if commodity prices recover.

Investment Thesis Summary

Deere’s margin trough thesis is logically sound — a global agricultural equipment leader with 60%+ market share in North American large row-crop equipment doesn’t lose permanently to lower crop prices. What changes is the timing.

The case for buying DE in 2026: you’re paying ~30x FY2026 earnings for a business that has demonstrated 25% operating margins at cycle peaks, is building a genuine software flywheel that compresses the cycle, and has settled its major regulatory controversy. The forward P/E premium reflects anticipation of cycle recovery.

The case for patience: FY2025 may not be the EPS trough, the May 21 earnings report could disappoint, and you’re getting only 1.1% in dividends while waiting. A position sized at 5–8% of portfolio with a 2–3 year horizon is more defensible than a concentrated near-term bet.

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This is informational analysis, not investment advice. All investment decisions are the sole responsibility of the individual investor.