John Deere (DE) has garnered significant attention from financial analysts following its stronger-than-anticipated fiscal first-quarter performance and a slight upward revision of its 2026 financial projections. This positive momentum is largely driven by a notable recovery in the construction and small agriculture sectors, reinforcing the company's belief that the current year represents the trough of its business cycle, paving the way for accelerated expansion in the future.
John May, the Chairman and CEO of John Deere, expressed optimism regarding the company's trajectory, highlighting the encouraging rebound in demand within construction and small agriculture. This sentiment is echoed by RBC Capital Markets analyst Sabahat Khan, who noted that Deere's robust first-quarter results exceeded expectations. Consequently, RBC has elevated its price target for Deere shares from $541 to $736, maintaining an Outperform rating, citing enhanced earnings predictability and increased confidence in the company's long-term growth prospects. The Equipment Operations division demonstrated strong performance, with net sales climbing by 17.5% year-over-year. This growth was primarily fueled by higher shipment volumes and favorable foreign exchange rates, effectively counteracting subdued pricing. Specifically, the Production and Precision Ag segment saw a 3.1% increase, Small Ag and Turf surged by 24.0%, and Construction and Forestry experienced a significant 33.9% rise, all benefiting from volume expansion and currency advantages.
Despite the positive sales figures, profitability faced challenges, with Equipment Operations operating margins declining by 184 basis points to 5.9% due to the impact of tariffs. Management anticipates approximately $1.2 billion in direct tariff expenses for fiscal year 2026. Nevertheless, Deere marginally upgraded its fiscal 2026 outlook across most product categories, with only South American tractor and combine sales forecasts adjusted downwards. This updated guidance suggests an increase of about $375 million in the midpoint of Equipment Operations net income and roughly a $500 million improvement in the midpoint of Equipment Operations operating cash flow.
Khan characterized the agricultural landscape as stable rather than exceptionally strong. Global crop production remains consistent, farm income expectations are showing modest improvements, and recent policy support, alongside renewed commodity demand signals—including China's increased purchases of U.S. soybeans—offer additional backing. Dealer inventory reductions throughout 2025 have better synchronized production with retail demand. Management continues to view 2026 as a potential low point in the cycle, positioning 2027 for a more robust recovery if replenishment activities follow suit. Regarding valuation, Khan's revised price target of $736 is based on applying an approximate 32-times multiple to RBC's fiscal 2027 adjusted earnings per share estimate of $23.02. This premium multiple is justified by an improving quality of earnings and the potential for renewed growth as the cycle transitions.
Other analysts have also adopted a more optimistic stance on Deere. Steven Fisher of UBS maintained a Buy rating and increased his price forecast to $775 from $535, while Jamie Cook of Truist Securities reiterated a Buy rating and raised her forecast to $793 from $612. Ross Gilardi of Bank of America Securities, while maintaining a Neutral rating, also elevated his price forecast to $672 from $502. As of publication on Friday, Deere shares experienced a slight dip of 0.54%, trading at $658.42, yet remain close to their 52-week high of $674.18.
The agricultural and heavy equipment manufacturer, John Deere, has shown promising signs of recovery, with its latest fiscal quarter exceeding financial community expectations. This performance, coupled with strategic adjustments and a brightening outlook for key market segments, has led to a wave of upgraded forecasts from leading financial institutions, indicating a strong belief in the company's continued ascent despite ongoing market dynamics.