Deere Stock at 38 Times Earnings: Pricing In a Rebound
Deere trades around $683.99 as I write this, within 3.1% of its 52-week high of $706, and at 38.0 times trailing earnings. Two years ago, when the down-cycle in farm equipment was at its worst, the stock traded closer to its five-year average multiple of 19.5 times. Something has clearly changed in how the market prices this business, and it isn’t the revenue line. The multiple moved. The earnings didn’t, not yet.
Deere’s fiscal 2025 revenue came in at $44.7 billion, down from $60.2 billion in fiscal 2023, a decline of roughly 26% over two years as the farm equipment replacement cycle rolled over. Net income fell alongside it, from $7.1 billion to $5.0 billion in the most recent fiscal year. Yet the stock hasn’t just recovered, it’s sitting near an all-time high with a multiple that has roughly doubled versus its own five-year norm. My thesis is that Deere’s stock has already priced in a cyclical recovery that the earnings numbers haven’t delivered yet, which makes the next two quarters more important than usual for anyone buying here. Deere’s financials page has the quarter-by-quarter detail.
The multiple moved before the earnings did
A stock trading at 38.0 times trailing earnings when its own five-year average is 19.5 times is telling you something about expectations, not about the current state of the business. Forward earnings of $20.61 imply 15% growth from the trailing $17.99, and the forward multiple of 33.2 is still well above the historical average. Price-to-sales tells a similar story: Deere trades at 3.8 times sales against a five-year average of 2.5, a gap that’s hard to explain with the revenue trend alone, since fiscal 2025 sales were still -12% below the prior year.
I don’t think that gap is irrational on its face. Deere’s quant rating has moved from a D to a B over the period the pack tracks, which is a meaningful re-rating, and the most recent earnings report on 2026-08-20 produced a +6.9% move in the stock, against an average post-earnings swing of 7.3%. That’s a market reading the print as better than feared, not as confirmation that the cycle has fully turned. Those are different things. The difference is the entire trade.
What the down-cycle actually did to the business
Crop prices ran hot for several years earlier this decade, which pulled equipment purchases forward as growers with strong cash flow replaced aging combines and tractors ahead of schedule. When crop prices cooled, that left a hole: fewer growers needed new equipment in the following years, dealer inventories built up, and Deere had to cut production to work down stock rather than keep shipping into a market that had already bought what it needed for a while. Fiscal 2023’s $60.2 billion in revenue was the cyclical peak; fiscal 2025’s $44.7 billion is roughly the trough as reported so far. Operating margin came in at 19% for the year, with gross margin of 36.5% versus 38.6% a year earlier, a modest compression that’s consistent with a manufacturer working through excess dealer inventory rather than one facing a structural problem with demand or pricing power.
That’s the case for treating this as an ordinary agricultural cycle rather than a company-specific issue, and I largely buy it, the same way I’ve argued that memory-chip demand swings are a timing question rather than a verdict on the business. Deere’s net margin of 11% and operating margin of 19% are not the numbers of a company that’s lost pricing discipline. What I’d flag instead is timing: quarterly revenue of $12.4 billion was up 5% year over year but down -6% sequentially, which is the kind of choppy, not-yet-confirmed recovery pattern that usually shows up before a clean turn, not after one.
Precision agriculture is the part that’s actually new
The piece of Deere’s story that’s actually different from the last down-cycle, in the early 2010s, is the precision-agriculture business: guidance systems, data platforms, and increasingly autonomous equipment that generate recurring software and subscription revenue layered on top of the traditional hardware sale. I don’t have a verified, Deere-specific dollar figure for that segment’s current run-rate to cite here, so I’ll say directly what I can support and what I can’t: the strategic logic is sound (recurring, higher-margin revenue smooths out a hardware cycle that used to swing harder), and the market’s willingness to pay a premium multiple is consistent with believing that logic. What isn’t yet visible in the numbers is a margin profile clearly better than the last cycle’s peak, and until it shows up in a full fiscal year of results, I’d treat the recurring-revenue thesis as the reason behind the higher multiple rather than as proof the multiple is fully earned.
This is similar in spirit to what I found looking at Cisco’s networking business, where a legacy hardware franchise built a recurring layer on top and the market re-rated the stock ahead of the segment fully showing up in reported margins. The pattern isn’t identical, Deere’s recurring revenue is smaller relative to the whole business, but the sequencing (multiple expands on the story, margins confirm it later or they don’t) rhymes.
What the analyst targets actually imply
The average analyst price target is $726, which is only 6% above where the stock trades today, with a high estimate of $813 (19% upside) and a low estimate of $615, which is actually below the current price (-10%). Seventy-nine percent of the 14 analysts covering the stock rate it a buy, which sounds bullish until you notice the average target implies single-digit upside from here. That combination, mostly bullish ratings paired with modest price-target upside, usually means the sell side likes the direction of the business but doesn’t think there’s much of a valuation gap left to close. I read that as broad agreement with my own read: the easy money in this re-rating has probably already been made.
| Metric | Deere now | Five-year average / prior period |
|---|---|---|
| P/E (trailing) | 38.0 | 19.5 |
| P/E (forward) | 33.2 | — |
| P/S | 3.8 | 2.5 |
| P/B | 6.6 | 5.5 |
| Revenue (FY2025) | $44.7 billion | $60.2 billion in FY2023 |
| Net income | $5.0 billion | $7.1 billion prior year |
| Operating margin | 19% | Gross margin 36.5% vs 38.6% prior year |
| Analyst target (avg) | $726 (6% upside) | Range $615–$813 |
Trough earnings, peak multiple, and why that’s normal
There’s a pattern in cyclical industrials that trips up investors who treat P/E like a static valuation tool rather than a moving target: multiples tend to be lowest when earnings are at their peak and highest when earnings are at their trough, because the market is pricing the average earnings power across the cycle, not the single year in front of it. Deere’s five-year average P/E of 19.5 was built partly during years like fiscal 2023, when revenue hit $60.2 billion and earnings were unusually strong, which pulled the multiple down even though the stock price itself was high. Now that earnings have troughed, at $17.99 trailing, the multiple has swung the other way to 38.0. Neither number, on its own, tells you whether the stock is cheap. What matters is where normalized, mid-cycle earnings power actually sits, and Deere hasn’t given the market a full year of data confirming what that normalized number is post-restructuring.
This is exactly why I’d rather look at the forward multiple against the five-year average than at the trailing number in isolation. At 33.2 times forward earnings versus a 19.5-times five-year average, the gap narrows but doesn’t close, which tells me the market expects next year’s earnings to be meaningfully better than trailing, but not enough better to fully justify paying historical-average multiples on a forward basis. That’s a specific, checkable claim: if fiscal 2026 EPS comes in near the $20.61 consensus, the forward multiple paid today will look reasonable in hindsight. If it comes in lower, today’s price will look like it front-ran a recovery that took longer than expected.
Where I could be wrong
The specific way this view fails is if fiscal 2026 revenue growth comes in clearly above the 15% implied by forward earnings, and margins expand back toward the FY2023 peak rather than just stabilizing. Short interest sits at only 1.9% of the float, which tells me the market isn’t positioned for a disappointment here; if the recovery does show up cleanly in the next two quarterly reports, a low-short-interest stock with 79% buy ratings has room to keep re-rating higher rather than mean-revert. I’d also note the dividend, a 0.95% yield on $6.48 in trailing payouts, isn’t a reason to own this stock on its own; it’s a small floor, not the thesis.
What would make me wrong the other way is a repeat of the sequential softness in the most recent quarter, -6% versus the prior quarter, turning into a longer stretch rather than a one-quarter blip. Deere’s own dealer inventory data and the next one or two quarterly reports will settle which read is right faster than any macro forecast will. I’ll be watching whether the fiscal Q1 report shows sequential revenue growth resume; if it doesn’t, a stock priced at 38.0 times earnings against a 19.5-times historical average has more room to fall than to rise.
This is similar to the multiple-versus-fundamentals question I raised in my look at AMD’s valuation, where the price had run ahead of a story that was directionally correct but not yet fully confirmed in the numbers. Deere isn’t as extended as that comparison, but the underlying tension, a market paying up for a turn before the turn is fully proven, is the same one an investor has to price for here.
Analysis and opinion only, not investment advice. Figures come from Deere’s quarterly and annual filings on SEC EDGAR and its investor site; valuation multiples are approximate and were checked on 2026-09-18.
Sources: Dividends (SEC Investor.gov glossary) (https://www.investor.gov/introduction-investing/investing-basics/glossary/dividend) · Dividends tax topic (IRS) (https://www.irs.gov/taxtopics/tc404)