Key Stats for Deere Stock
- Current Price: ~$531 (May 21)
- Q2 FY26 Equipment Operations Revenue: $11.778B (+5% YoY)
- Q2 FY26 Net Income: $1.773B
- Q2 FY26 EPS: $6.55 (beat Street estimate of $5.70 by 15%)
- FY26 Net Income Guidance: $4.5B–$5B (unchanged)
- TIKR Model Price Target: ~$785
- Implied Upside: ~48%
DE Stock Beats on EPS but a $1.2 Billion Tariff Bill Is the Number Investors Missed
Deere & Company (DE) reported Q2 FY26 equipment operations revenue of $11.778B, a 5% increase year-over-year, while earnings per share of $6.55 beat the Street estimate of $5.70 by 15%, according to Christopher Seibert, Manager of Investor Communications, on the Q2 2026 earnings call.
The headline beat was partly artificial: a $272M IEEPA tariff refund lifted equipment operations margins by nearly 2.5 points.
Deere’s ongoing direct tariff exposure remains approximately $1.2B for the full year, about a 3% equipment operations margin headwind.
Construction and Forestry drove the clearest organic strength in the quarter, with net sales up 29% year-over-year to $3.79B and an operating margin of 14.8%, supported by higher shipment volumes, favorable price realization above 2.5 points, and accelerating infrastructure and data center demand.
Small Ag and Turf also delivered, with net sales up 16% to $3.485B and an operating margin of 20.6%, benefiting from turf market recovery and continued strength in dairy and livestock.
Production and Precision Ag remained the drag on the portfolio, with net sales down 14% to $4.503B and an operating margin of 15.7%, driven by lower large ag shipment volumes that no amount of currency tailwinds could fully offset.
Brent Norwood, Chief Financial Officer, stated on the Q2 earnings call that “we are delivering structurally higher levels of profitability compared to the last time we were at a similar point in the cycle despite the headwind that comes from tariffs.”
Deere returned $635M to shareholders through share repurchases and dividends during the quarter, and maintained its FY26 net income guidance of $4.5B to $5B unchanged, signaling management confidence that the tariff refund and segment diversification together keep the annual range intact.
DE stock fell 5% despite the beat. TIKR’s model still sees 48% upside — if the ag cycle cooperates
DE Stock Revenue Returns to Growth but Gross Margins Have Not Recovered With It
Deere & Company stock spent six consecutive quarters contracting on revenue, with YoY declines reaching a trough of -30.2% in Q3 FY25, before the inflection arrived in Q1 FY26 at +12.6% and extended to +13.0% in Q2 FY26.
The latest quarter pulled that growth rate back to +4.7%, as total revenues reached $13.37B, with the deceleration reflecting the ongoing pressure in Production and Precision Ag rather than any broad deterioration.
Gross profit held steady at $3.85B in Q2 FY26, essentially flat against $3.88B in the year-ago quarter, but gross margins compressed from 29.5% to 28.8% over that same period.
The gross margin compression is not confined to one quarter: margins peaked at 30.2% in Q2 FY25 and have ranged between 25.1% and 28.8% across the five most recent quarters, reflecting the persistent tariff cost structure management has absorbed rather than passed to customers.
The $272M tariff refund recognized in Q2 FY26 is embedded in the production cost line and inflates the reported margin picture; on a normalized basis, the gross margin trajectory is flatter than the headline suggests.
Total revenues troughed at $8.51B in Q3 FY25 and have now recovered to $13.37B, driven by seasonal patterns and segment diversification, with the revenue recovery arriving faster than the margin recovery.
TIKR’s ~$785 Target on Deere Stock Assumes the Ag Recovery Lands on Schedule
TIKR’s valuation model prices Deere & Company stock at approximately $785 by October 2030, implying an around 48% total return from the current price of ~$531, or 9.2% annualized over 4 and a half years.
The mid-case assumes a revenue CAGR of 8.2% and a net income margin of 13%, figures that embed a meaningful recovery in Production and Precision Ag from today’s below-trough volume levels while C&F continues above mid-cycle.
The model also bakes in a P/E compression CAGR of -2.0% in the mid-case, meaning the multiple itself is expected to contract as earnings recover, which caps the upside and requires revenue and margin expansion to do the heavier lifting.
The Q2 result leaves the investment thesis in a genuinely two-sided position: construction momentum and an unchanged net income guide are positives, but the ag cycle recovery timing and the $1.2B annual tariff burden are real variables that the model cannot resolve in either direction.
The bull case rests on construction momentum and an ag inventory reset that could trigger meaningful replacement demand in 2027, with precision technology adoption providing a recurring revenue layer through the cycle.
The bear case centers on a $1.2B annual tariff burden that is compressing margins without a customer-facing offset, a deteriorating South American market that worsened sharply this quarter, and a large ag segment still guided for declining sales that remains Deere’s biggest revenue driver.
The $272M tariff refund that flattered Q2 margins was a one-time item, so investors pricing in a sustained margin recovery are working from a cleaner number than the reported 16.9% actually supports.
Should You Invest in Deere & Company?
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