Deere's (DE) fiscal Q2 results exceeded consensus, and it continues to execute well despite challenging conditions in core markets, positioning it well for fiscal 2027 and beyond, RBC Capital Markets said in a note emailed Tuesday.
Fiscal 2026 Construction & Forestry guidance for net sales growth was revised to about 20% from 15%, while margins were raised to 10% to 12% from 9% to 11%, implying volume/mix of around 15.5% on unchanged price and foreign exchange movement, according to the note.
Financial Services net income guidance was raised to $860 million and tax rate was lowered to 24% to 26%. Production & Precision Agriculture and Small Agriculture & Turf guidance was unchanged, though PPA pricing growth was lowered to around 1% from 1.5%, largely due to weaker South America pricing, the brokerage said.
Management continues to view fiscal 2026 as the trough, citing normalized used equipment values, new inventory levels more than 50% below mid-2024 highs, dealer financing portfolios down 15% or more, and elevated fleet ages in North America, according to the note.
Farmer economics in fiscal 2027 are constructive, with corn/soy up 20% since August and inputs at favorable levels, though the Iran conflict is pressuring fertilizer and energy costs, the brokerage added.
RBC kept an outperform rating on Deere and raised the price target to $752 from $736.
Price: $526.45, Change: $-2.70, Percent Change: -0.51%