Deere Earnings: Has the Stock Outrun the Farm Cycle?

Deere & Co. NYSE: DE stock is up over 9% after the company surprised analysts with a beat-and-raise quarter. For the company's Q3 of its fiscal year 2026 (FY2026), Deere delivered revenue of $12.61 billion, beating estimates of $10.81 billion. On the bottom line, adjusted earnings per share (EPS) of $5.10 beat estimates for $4.71.

Both numbers were also higher than in the same quarter of FY2025. Net sales and revenues were up 5%, and diluted EPS was up 7%. The year-over-year beat on the bottom line was particularly noteworthy because the number had come in lower in the last two quarters.

Investors were looking for permission to push DE higher. The earnings report gave them that permission, and the question now shifts from a valuation concern to how much growth will come from a re-rating.

Why the Beat Goes Beyond the Farm

The results from Deere are a good example of why it's important to view a company with a wide lens. The company's core agriculture market has been under pressure due to geopolitical and regulatory concerns. That's on top of farmers dealing with more extreme weather events that have hurt crop yields.

If that were the entire business model, DE would be in trouble. However, like Caterpillar NYSE: CAT, Deere has equipment that is essential to infrastructure in all its forms. That includes the buildout of data centers. This demand is real and will add to Deere's balance sheet even if only a third of forecasted projects get the green light.

For current DE investors, that's been the reason to hold the stock during this difficult agricultural equipment cycle. However, management expressed its belief that the company is nearing the bottom of that cycle.

Early order program trends, improving used-equipment inventories, and rising customer adoption of Deere's precision technology give the company confidence in its long-term positioning. Deanna Kovar, president of Deere's worldwide agriculture and turf division, added that Production & Precision Ag order books are effectively full for the year.

Management also noted that used high-horsepower tractor inventories from model years 2023 and 2024 are down nearly 40% from a year earlier. That inventory drawdown matters because it's usually the first sign that a replacement cycle is close behind.

Construction, Not Agriculture, Carried the Quarter

While the ag story was a key focus, the numbers show construction and forestry did the heavy lifting this quarter. That segment posted net sales growth of 18% to $3.62 billion, operating profit surged 84% to $436 million, and operating margin increased to 12.1%, up sharply from 7.7% in the same quarter last year. Small Agriculture and Turf also contributed, helped by higher shipment volumes and favorable pricing.

Deere also raised its outlook for the segment. Management now expects U.S. and Canadian construction-equipment industry sales to grow 5% to 10%, up from a flatter prior view, citing large infrastructure, data center, and energy-related projects. That's the clearest evidence yet that the AI infrastructure buildout is showing up in Deere's order book.

The agriculture side of the business tells a more mixed story. Deere still expects large agricultural equipment sales in the U.S. and Canada to decline 15% to 20% in fiscal 2026, and it now sees a similar 15% to 20% decline in South America, where high production costs and elevated interest rates are weighing on farmers.

Europe and Asia are both expected to be roughly flat. The U.S. and Canadian small agriculture and turf market is projected to be flat to up 5%, a relative bright spot within an otherwise soft ag picture.

A Guidance Raise That Signals Confidence

Deere raised the low end of its full-year net income guidance to $4.75 billion, up from $4.5 billion, while holding the top end at $5 billion.

That's a meaningful signal.

Companies don't typically raise the floor on guidance unless they have real visibility into demand holding up through the rest of the year.

For the first nine months of fiscal 2026, net income attributable to Deere totaled $3.8 billion, or $14.06 per share, still trailing the $3.9 billion, or $14.57 per share, posted over the same stretch last year.

That raise in guidance suggests management believes that the gap is set to close, not widen.

Is the Turnaround Already Priced In?

But is that catalyst priced in? As of this writing, DE trades at a price-to-earnings (P/E) ratio of around 35x. It also trades at a price-to-sales (P/S) ratio of around 3.7. Both are above the stock's historic average. The P/E ratio is also at a premium to the S&P 500, which many analysts believe is a sign the market is overvalued.

However, DE is up nearly 35% in 2026, suggesting investors are looking through the premium and the weakness in both Precision Ag and large-ag industry sales, which the company expects to be down 15% to 20% in North America.

What the Chart Is Telling Investors

The DE chart adds more nuance to that story. The stock made strong gains in the first two months of the year, gave most of those gains back in March, and has been range-bound since then. Even after the post-earnings surge, DE still trades about 10% belove its 52-week high. Recent increases in analyst price targets suggest the stock could close that gap.

For investors who have been waiting on the sidelines during that range-bound stretch, this quarter may be the confirmation they needed. The combination of a construction and infrastructure tailwind, a management team calling the bottom on the ag cycle, and a chart that's finally breaking out of a five-month base gives DE a cleaner setup than it's had in over a year.

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