Deere’s stock is priced for a margin peak the filings say hasn’t arrived yet. That gap is the whole story.
Three years ago, Deere was the envy of industrial America. Revenue was climbing toward $60 billion, net margins hit a record, and the stock was being repriced as a technology company in a farmer’s clothing. Then the cycle turned. Farm incomes softened, large-tractor orders dried up, and by fiscal year 2025 the company’s revenue had fallen back nearly to where it was in 2021. The stock, though, barely flinched. That is the puzzle sitting in front of anyone who reads the filings.
In one breath
The filed numbers show Deere’s net margin has fallen from a peak of 17% in fiscal 2023 to 11% in fiscal 2025, a slide that is still playing out. The stock carries a price-to-earnings multiple of 33, which is nearly double the company’s own decade-long median. Those two readings, a business earning less per dollar of sales than it has in years and a price tag that assumes more than ever, cannot both be right. The open question is which one gives way first.
A number that should not exist alongside another number
Start with this pairing. Deere’s fiscal year 2025 10-K shows a net margin of 11.0%, the lowest in the five-year run visible in our data. Our data puts the current price-to-earnings multiple at the 97th percentile of the company’s own decade-long history. In plain terms: the business is earning the least it has per dollar of sales in recent memory, and the market is paying more per dollar of profit than it has in almost any prior year on record. Both facts are true at the same moment. That is the tension.
The math here, meaning what the filed fundamentals actually justify, and the mood, meaning what the market is currently willing to pay, have rarely been further apart for this company. Understanding why requires a short trip through how Deere got here.
The boom, the hangover, and the tariff bill
When commodity prices surged in 2022 and 2023, farmers had money and Deere had a backlog stretching months into the future. Revenue grew sharply two years running, and the fiscal 2023 10-K recorded a net margin of 16.6%, a figure the company had never previously approached. The stock was being valued not just on current earnings but on the idea that precision agriculture technology, GPS-guided planting, automated spraying, subscription software layered onto the iron, had permanently lifted what Deere could earn.
Then the hangover. Commodity prices retreated, farm incomes softened, and dealers found themselves sitting on more inventory than they wanted. The USDA’s Economic Research Service, as reported by Barchart, estimated U.S. net farm income for 2026 at $153.4 billion, a nominal decline from 2025. Nick Paulson, an agricultural economist at the University of Illinois, put it plainly: “for 2026, we’re still looking at weaker returns,” with higher commodity prices likely offset by higher input costs. Farmers buying less means Deere selling less, and that is exactly what the filings show.
Layered on top is a tariff bill Deere itself quantified. Manufacturing Dive reported that Deere estimated a pre-tax tariff cost of $900 million for fiscal 2026, revised down from an earlier figure after a February 2026 Supreme Court ruling offered partial relief. Nine hundred million dollars is roughly three-quarters of what the company expects to earn in a single quarter this year. That is not a rounding error.
What the most recent filing actually says
The 10-Q for the quarter ended May 3, 2026 is the freshest evidence available. Equipment operations posted a solid operating margin for the quarter, which sounds healthy until it sits next to the Production and Precision Agriculture segment’s story: net sales in that segment fell 14% year over year, and its operating margin compressed from 22% to 15.7%, as lower shipment volumes collided with higher production costs. Large tractors and combines, the highest-margin machines Deere makes, are the ones farmers are buying least right now.
Management’s full-year fiscal 2026 net income guidance, confirmed in the Q2 earnings release, implies something worth sitting with. At today’s share price and shares outstanding, the market values the whole company at around $165 billion. If Deere hits the midpoint of its guidance range, buyers at today’s price are paying roughly 35 times this year’s expected earnings for a business at the trough of its cycle. The decade median multiple, per our data, is 16.4. Think of it this way: a buyer at today’s price is paying a premium more than twice the historical norm, at the moment the business is earning the least per dollar of sales it has in years.
Where the mood finds its argument
The bull case is not invisible. AgNavigator reported in February 2026 that Deere’s own management called this the bottom of the agricultural cycle and predicted a rebound. The Construction and Forestry order book, per the Q2 earnings call as summarized by GuruFocus, strengthened by more than half since November. Small agriculture and turf sales are expected to grow meaningfully this fiscal year. Pricing power, the ability to raise prices without losing customers, remained positive across all segments in Q2. A business that can hold price while volume falls is a business with genuine competitive strength.
JPMorgan analysts, as reported by Barchart, reiterated a Neutral rating ahead of the Q3 earnings release and reduced their price estimate below the current share price, citing near-term earnings uncertainty. That analyst view is one data point in the broader range of market opinion on the stock.
Reading the numbers
Net margin, 11.0% in fiscal 2025 vs. 16.6% peak in fiscal 2023. The net margin is what a company keeps from each dollar of sales after every bill, tax, and interest payment is settled. Think of a shop that takes in $100 and keeps $11 after all costs: that is 11%. At the 2023 peak, Deere kept nearly $17 of every $100. The filed slide from peak to trough is six dollars per hundred, and it is still in progress.
P/E of 32.7 vs. decade median of 16.4, at the 97th percentile of its own history. The price-to-earnings multiple, or P/E, is the price tag per dollar of annual profit. A household buying a rental property for 16 times its annual rent is paying the historical norm; paying 33 times means betting the rent doubles. Our data shows Deere’s current multiple has been higher than this in only 3% of months over the past decade.
Equipment operations operating margin, 16.9% in Q2 fiscal 2026. The operating margin is what remains from each dollar of sales after production and overhead costs, before interest and taxes. The Q2 figure looks solid in isolation. The catch is that it is propped up by construction and small ag, while the large-agriculture segment, historically the richest part of the business, is running at 15.7% and falling. If the mix shifts back toward large ag at depressed volumes, the blended margin follows it down.
Full-year 2026 net income guidance, $4.5 billion to $5.0 billion. At the midpoint, this is roughly what Deere earned in fiscal 2021, the year before the boom. IF earnings land at the midpoint of guidance and the multiple compresses to the decade median of 16.4, the arithmetic would point to a range near $280 to $310. IF instead earnings recover toward fiscal 2023 levels and the multiple holds near current levels, the same arithmetic would point to a range near $490 to $530. Both outcomes are conditional on results not yet filed. The gap between those two scenarios is wide enough to be material to any valuation framework applied to this business.
Sources
- Deere 10-Q, quarter ended May 3, 2026 (SEC EDGAR)
- Deere 10-K, fiscal year ended November 2, 2025 (SEC EDGAR)
- Deere 10-K, fiscal year ended October 29, 2023 (SEC EDGAR)
- Deere Q2 2026 earnings release (PR Newswire)
- Deere Q2 2026 earnings call highlights (GuruFocus)
- Analyst consensus and JPMorgan commentary (Barchart)
- Tariff cost estimates and 2026 outlook (Manufacturing Dive)
- Deere cycle bottom commentary (AgNavigator)
