Truist reiterates Buy on Deere stock, cites strong order book By Investing.com

Truist reiterated a Buy on Deere with a $793 price target, citing full production slots for fiscal 2026 early-order lines, robust construction equipment demand, and healthy pricing trends in corn and soybeans. Deere is also comfortable with the $1.2 billion tariff cost embedded in fiscal 2026 guidance and has resumed hiring at Waterloo while increasing production in Dubuque to cut lead times. The company’s 56-year dividend streak and multiple bullish analyst notes reinforce a constructive medium-term outlook, though shares already trade at a 34.35 P/E and are flagged as overvalued by InvestingPro.

Analysis

The market is treating Deere as a pure cyclical reopening story, but the more important dynamic is margin durability. When production slots are full this far out, the company gains unusual pricing power on mix, dealer allocation, and lead-time management, which can offset tariff noise and preserve earnings even if unit growth moderates. That makes this less about near-term volume and more about how long Deere can keep converting backlog into high-ROIC shipments before channel normalization compresses the spread.

Second-order winners are the suppliers and peers tied to construction and precision ag that benefit from a prolonged equipment replacement cycle, while the biggest losers are equipment dealers and buyers hoping for discounting. If crop inputs are already locked and grain prices stabilize, farmers’ affordability improves just enough to sustain replacement demand without forcing a rush, which extends the runway but also caps upside surprise. The real swing factor is Brazil and broader ag sentiment: a mild deterioration there would likely hit multiples before it meaningfully hits the income statement.

The contrarian view is that the stock may be pricing in a cleaner earnings inflection than the cycle can deliver. A high multiple against a near-full backlog and tariff visibility is not a free lunch; once production catches up, any deceleration in orders can re-rate the name quickly because the market is paying for sustained scarcity, not just current demand. In other words, the setup is bullish operationally but vulnerable financially if the next two quarters fail to show accelerating order conversion or if construction demand proves to be merely stable rather than re-accelerating.

Key Decisions for Investors

• Stay long DE, but prefer call spreads over stock for the next 1-2 quarters: buy 6-9 month bull call spreads to participate in backlog-driven earnings resilience while capping downside if the multiple compresses.
• Use any further strength in DE to hedge with a partial short against CAT or AGCO on a 3-6 month horizon; Deere appears better positioned on backlog visibility, but a broad ag/construction slowdown would still hit the group.
• Add to DE only on post-earnings pullbacks or if the market gives a better entry at a lower multiple; current valuation leaves limited room for execution misses despite the favorable operational setup.
• Watch Brazil-sensitive ag sentiment as the key catalyst window over the next 1-2 quarters; if Brazilian demand data weakens, reduce exposure before it becomes visible in reported margins.
• If you want a cleaner relative-value expression, go long DE / short an industrial cyclical with less pricing power over the next 3-6 months, as Deere’s backlog support should outperform peers if growth cools but does not collapse.