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.

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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.