equitysearch/examples/de-reentry-2026-08-21.md

# Example evaluation — Deere & Co (DE), 2026-08-21

> Source: prior AI chat provided by the user as a reference "gold standard" for the
> depth and structure of a thorough single-stock evaluation. Used to derive the
> `equity-evaluation` and `analysis-agent` spec requirements. Context: user sold DE
> into a post-earnings spike and asked for a good re-entry point.

---

**Prompt:** I sold DE today after a great bump after earnings announcement. What is a good reentry point?

**Where DE stands after today**

You sold into a genuinely strong tape. DE closed at $620.94, up $40.31 or 6.94% on 2.49x normal volume, 7.90% below the $674.19 52-week high and 43.40% above the $433.00 low. Market cap $167.6B, trailing P/E 34.50.

Fiscal Q3 (ended Aug 2) delivered EPS of $5.10 against $4.79 consensus, a $0.31 beat, with net income of $1.379B up 6.98% year over year — Deere's first year-over-year profit gain in about three years. Guidance went to $4.75B–$5.00B net income from $4.5B–$5.0B, equipment cash flow to $5.0B–$5.5B, and Financial Services to $870M (MarketBeat).

One thing to discount: the headlines touting a 17% revenue beat compared consensus of $10.81B — which was an equipment-net-sales number — against total revenues of $12.608B. Equipment net sales actually came in at $10.999B. Real revenue growth was 4.91%. The beat was in margin and EPS, not volume.

| Metric | Q3 FY2026 | Q3 FY2025 |
|---|---|---|
| Revenue | $12.608B | $12.018B |
| Operating profit | $2.592B | $2.394B, +8.27% |
| Gross margin | 37% | — |
| Operating margin | 21% | 20% |
| Diluted EPS | $5.10 | $4.75 |
| Operating cash flow | $2.208B | — |
| Free cash flow | $1.305B | — |

Note that $110M of Section 232 tariff refunds landed in the quarter, which analysts pegged at 20 to 30 cents of the $5.10. Management said the outlook assumes no further refunds this year.

**Segment autopsy**

| Segment | Revenue | YoY | Op profit | YoY | Op margin | Prior-year margin |
|---|---|---|---|---|---|---|
| Production & Precision Ag | $3.998B | -6.44% | $527M | -9.14% | 13.18% | 13.57% |
| Small Ag & Turf | $3.383B | +11.84% | $622M | +28.25% | 18.39% | 16.03% |
| Construction & Forestry | $3.618B | +18.27% | $436M | +83.97% | 12.05% | 7.75% |
| Financial Services | $1.371B | -3.32% | $271M | +1.88% | — | — |

The core large-ag franchise is still shrinking and is now only 32.32% of segment revenue. What carried the quarter was construction — driven in part by data-center and infrastructure earthmoving demand — plus pricing. C&F's profit near-doubling came from $244M of price realization on only $22M of volume gain. That is a quality-of-earnings caveat: price, not units.

**Your instinct has been right all year**

This is the part that matters for timing. Selling DE into a post-earnings spike has been the correct trade repeatedly in 2026:

- Q1 print (Feb 19): stock jumped 11.58% and printed $674.19 that day. It then fell to $549.68 by Mar 31 (-18.47%) and to $515.15 by May 21 (-23.59%).
- Q2 print (May 21): -5.19%.
- Q4 FY25 print: -5.67%. Q3 FY25 print: -6.76%.

Today's +7.16% one-day move against a 4.40% options-implied expectation was outsized, though shy of the 7.40% average absolute post-earnings move. Monthly ranges this year have been wide — 674 down to 522 in February, 636 to 515 in May/June, 644 to 576 in July. Realized 60-day volatility runs near 34% annualized. A stock that moves like this will give you multiple re-entries.

The counterpoint, and it is real: today's gap was filled intraday. DE opened at $611.12 versus a $580.63 prior close, traded down to $586.48 — essentially closing the gap — and still finished at $620.94 near the $639.00 high. Buyers absorbed the fill. There is no unfilled gap left to wait for.

**Analyst positioning**

Coverage is split down the middle: 14 ratings, 7 bullish and 7 neutral, zero bearish. Average target $652.82 is only 5.13% above today's close, and the median $636.00 is 2.43% away. Range runs $531 to $812.

You effectively sold at the median target. Going into the print, JP Morgan had cut to $570 and Bernstein to $580; Evercore trimmed to $632. Targets will get marked up over the next week, but consensus is not where the upside is right now.

**Valuation — the uncomfortable part**

| Metric | Value |
|---|---|
| TTM diluted EPS | $18.00 |
| Trailing P/E (recomputed) | 34.50 |
| FY2026 consensus EPS (derived) | $18.06 |
| FY2027 consensus EPS (derived) | $21.19 |
| FY2027 forward P/E | 29.30 |
| FY2027 net income growth | +17.34% |
| FY2027 revenue growth | +7.45% |
| FY2026 FCF yield | 2.37% |
| FY2027 FCF yield | 3.45% |
| Dividend yield | 1.04% |

One feed caveat: the estimates service reports FY2027 diluted EPS of $22.19, which is 1.05x the figure you get dividing consensus net income of $5.721B by the 269.9M implied share count. I used the derived $21.19 throughout.

Against its own history:

| Fiscal year | P/E | Diluted EPS | ROIC | ROE |
|---|---|---|---|---|
| FY2023 | 10.43 | $34.63 | 16.16% | 48.30% |
| FY2024 | 15.92 | — | — | — |
| FY2025 | 24.95 | $18.50 | 9.13% | 20.48% |
| Today | 34.50 | $18.00 | — | — |

The multiple is 1.38x last fiscal year's already-elevated level. Earnings power has fallen 46.58% from the FY2023 peak, so a high P/E on trough earnings is defensible — but you are paying 29x for the recovery year, before the recovery is visible in units.

**Bull vs bear**

Bull:
- Management explicitly reaffirmed that fiscal 2026 is the bottom of the ag cycle, citing early-order trends and improving used inventories.
- Used model-year 2023/2024 high-horsepower tractor inventory is down nearly 40% year over year, and model-year 2027 sprayer and planter early orders were running mid-single digits above prior year (MarketBeat).
- New field inventory for 220+ horsepower tractors ended FY2025 at the lowest unit level in over 17 years.
- Equipment operating margin hit 14.4% in a trough quarter — evidence the cost structure is genuinely better.
- CNH also flagged a 2027 rebound on fleet age.

Bear:
- Tariffs get worse next year: net expense of roughly $750M in FY2026 versus a run rate near $1B in FY2027, an explicit year-over-year headwind (MarketBeat).
- AGCO cut estimates on input-cost pressure to farmers, so the sector read is not unanimous.
- C&F strength depends on infrastructure and data-center capex, which is not a farm-cycle hedge — it is a different cycle that can roll first.
- Balance sheet carries $63.94B total debt and $54.25B net debt at 4.65x EBITDA and 2.46x equity, with trade receivables at 55.17% of total assets. Most of that is the captive finance book, not industrial leverage, but it means credit quality on the farm customer base is a live risk in a downturn.
- Days inventory sits at 93.97 versus 80.59 in FY2023.
- Cash return is thin here: 1.04% dividend on $6.47 annualized, and only $197M of buyback in the quarter versus $438M of dividends.

**Entry levels**

| Level | What it is | Below today | Trailing P/E | FY2027 P/E | Div yield |
|---|---|---|---|---|---|
| $611.23 | 20-day average | -1.56% | 33.96 | 28.84 | 1.06% |
| $603.51 | 50-day average | -2.81% | 33.53 | 28.48 | 1.07% |
| $580.63 | pre-earnings close, Aug 19 low $579.31 | -6.49% | 32.26 | 27.40 | 1.12% |
| $576.45 | July 15 swing low | — | — | — | — |
| $558.06 | 200-day average | -10.13% | 31.00 | 26.33 | 1.16% |
| $549.68 | March 31 swing low | -11.48% | 30.54 | 25.94 | 1.18% |
| $515.15 | May 21 swing low | -17.04% | 28.62 | 24.31 | 1.26% |

How I would use that: the $576–$604 band is the practical first re-entry — it lines up the 50-day, the July low, and the pre-earnings shelf, and it is where four separate 2026 pullbacks have found footing. Starting a half position anywhere in the $585–$600 zone is defensible. The $549–$560 band, where the 200-day and the March low converge, is the high-conviction rung and the only level that gets you a FY2027 multiple in the mid-20s. Reserve the balance of the position for there.

What I would not do is chase inside a week of a 7% gap. Every gap-up on earnings this year has been given back within eight weeks.

**Bottom line**

You sold well. At $620.94 the stock trades at 34.50x trailing and 29.30x a recovery year that is still a forecast, with 2.43% upside to the median analyst target and a 1.04% dividend. The story is real — 2026 is very likely the cycle bottom and the used-inventory data supports it — but you are not being paid to own the wait, and tariffs get $250M worse next year before ag units get better.

Plan: bid $585–$600 for a starter tranche, $549–$560 for the main tranche. Next catalyst is the Q4 FY2026 report on November 25, where consensus sits at $4.47 EPS on $10.95B — that print carries the first formal FY2027 guide, which is the single most important event for this position. If DE holds above the $611.23 20-day average through mid-September, the cycle-turn bid is real and you should take the higher rung rather than hold out for $550.

The one metric to watch: Production & Precision Ag unit volumes. Price realization and construction carried this quarter; the thesis only works when large-ag volumes stop falling.

_This is analysis, not investment advice._