Deere (DE)

Agricultural and construction machinery company Deere (NYSE:DE) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 5.5% year on year to $12.02 billion. Its GAAP profit of $4.75 per share was 3.6% above analysts’ consensus estimates.

Company Overview

Revolutionizing agriculture with the first self-polishing cast-steel plow in the 1800s, Deere (NYSE:DE) manufactures and distributes advanced agricultural, construction, forestry, and turf care equipment.

Agricultural machinery companies are investing to develop and produce more precise machinery, automated systems, and connected equipment that collects analyzable data to help farmers and other customers improve yields and increase efficiency. On the other hand, agriculture is seasonal and natural disasters or bad weather can impact the entire industry. Additionally, macroeconomic factors such as commodity prices or changes in interest rates–which dictate the willingness of these companies or their customers to invest–can impact demand for agricultural machinery.

Deere’s peers and competitors include Caterpillar (NYSE:CAT), Eaton (NYSE:ETN), and AGCO (NYSE:AGCO).

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Deere’s sales grew at a tepid 4.6% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector and is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Deere’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 16.3% annually. Deere isn’t alone in its struggles as the Agricultural Machinery industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.

Deere also breaks out the revenue for its three most important segments: Production & Precision Agriculture , Construction & Forestry , and Small Agriculture & Turf, which are 35.6%, 25.5%, and 25.2% of revenue. Over the last two years, Deere’s revenues in all three segments declined. Its Production & Precision Agriculture revenue (tractors, harvesters, tillage) averaged year-on-year decreases of 26.5% while its Construction & Forestry (loaders, excavators, dump trucks) and Small Agriculture & Turf (mowers and other small vehicles) revenues averaged drops of 13% and 16.7%.

This quarter, Deere reported year-on-year revenue growth of 5.5%, and its $12.02 billion of revenue exceeded Wall Street’s estimates by 2.3%.

Looking ahead, sell-side analysts expect revenue to grow 16.5% over the next 12 months, an improvement versus the last two years. This projection is eye-popping for a company of its scale and implies its newer products and services will spur better top-line performance.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Deere has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 20.1%.

Analyzing the trend in its profitability, Deere’s operating margin decreased by 4.4 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Deere generated an operating margin profit margin of 13%, down 7.1 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Deere’s EPS grew at a spectacular 17.4% compounded annual growth rate over the last five years, higher than its 4.6% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

Diving into the nuances of Deere’s earnings can give us a better understanding of its performance. A five-year view shows that Deere has repurchased its stock, shrinking its share count by 14.1%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Deere, its two-year annual EPS declines of 24.8% mark a reversal from its (seemingly) healthy five-year trend. We hope Deere can return to earnings growth in the future.

In Q2, Deere reported EPS of $4.75, down from $6.29 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 3.6%. Over the next 12 months, Wall Street expects Deere’s full-year EPS of $19.13 to grow 7.4%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Deere has shown robust cash profitability, enabling it to comfortably ride out cyclical downturns while investing in plenty of new offerings and returning capital to investors. The company’s free cash flow margin averaged 12.7% over the last five years, quite impressive for an industrials business.

Taking a step back, we can see that Deere’s margin dropped by 3.9 percentage points during that time. Continued declines could signal it is in the middle of an investment cycle.

Deere’s free cash flow clocked in at $1.44 billion in Q2, equivalent to a 12% margin. The company’s cash profitability regressed as it was 12.4 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Deere hasn’t been the highest-quality company lately, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 30.7%, splendid for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Deere’s ROIC has unfortunately decreased. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Debt is a tool that can boost company returns but presents risks if used irresponsibly. As long-term investors, we aim to avoid companies taking excessive advantage of this instrument because it could lead to insolvency.

Deere’s $66.65 billion of debt exceeds the $9.99 billion of cash on its balance sheet. Furthermore, its 7× net-debt-to-EBITDA ratio (based on its EBITDA of $8.31 billion over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Deere could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope Deere can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

We were also glad its revenue outperformed Wall Street’s estimates. On the other hand, its . Overall, we think this was a decent quarter with some key metrics above expectations. Investors were likely hoping for more, and shares traded down 4.4% to $490.49 immediately after reporting.

Updated: November 16, 2025 at 10:34 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Deere.

We see the value of companies helping their customers, but in the case of Deere, we’re out. First off, its revenue growth was weak over the last five years. And while its impressive operating margins show it has a highly efficient business model, the downside is its projected EPS for the next year is lacking. On top of that, its diminishing returns show management's prior bets haven't worked out.

Deere’s P/E ratio based on the next 12 months is 25.6x. This multiple tells us a lot of good news is priced in - we think there are better opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $526.49 on the company (compared to the current share price of $476.63).