DE or CNH: Which Equipment Maker Deserves a Spot in Your Portfolio?

Agricultural and construction equipment giants Deere (DE) and CNH Industrial (CNH) face severe near-term headwinds, reporting seven consecutive quarters of revenue declines driven by weak farmer sentiment, soft commodity prices, and high interest rates. Deere projects a 30% decline in 2025 large agricultural equipment sales in the U.S. and Canada, while CNH anticipates an 11-19% overall net sales drop for the year. Both companies are strategically investing in precision farming and automation for long-term growth, but CNH currently offers a more attractive valuation at 17.71x forward earnings compared to Deere's 24.49x.

Analysis

Both Deere & Company (DE) and CNH Industrial (CNH) are navigating a significant industry downturn, marked by seven consecutive quarters of declining revenues for both firms. The headwinds are macroeconomic, driven by weak farmer sentiment from soft commodity prices and high interest rates, which are depressing demand in both the agricultural and construction sectors. The forward-looking guidance is stark: Deere projects a severe 30% decline in its key U.S. and Canada large agriculture equipment market for fiscal 2025, with its EPS expected to fall 26.54%. CNH anticipates a similarly challenging year, forecasting a total net sales decline of 11% to 19% and a sharper EPS drop of 41%. Despite these near-term pressures, both companies are investing in long-term growth drivers like precision farming and automation. CNH is notably advancing its in-house production, with 80% of its precision components developed internally, aiming for margin and market share gains. From a market perspective, DE has outperformed YTD with a 21.2% gain but trades at a premium forward P/E of 24.49x. In contrast, CNH has lagged with a 15% gain but offers a more attractive valuation at a 17.71x forward P/E, a discount to its industry and the broader market.

Key Decisions for Investors

• Investors should exercise caution in the near term, as both companies have issued severe guidance for 2025, including a projected 30% sales drop in DE's key market and a 41% EPS decline for CNH.
• The primary decision is between DE's market leadership and recent stock outperformance, which comes at a premium valuation of 24.49x forward earnings, versus CNH's more attractive valuation at 17.71x P/E, which is coupled with steeper earnings pressure and downward trending analyst estimates.
• For those with a long-term horizon, the current cyclical downturn could present an entry point, but it is critical to monitor for a stabilization in agricultural equipment orders and commodity prices before building a position.