What Separates DE Stock From Its Peers Right Now

The iconic green tractor company is priced like the best operator in its field, but its results are still trying to catch up to the market's high expectations.

Deere & Company (DE) makes the large green tractors and combines that are icons of American farming. But it also builds heavy equipment for construction and forestry, competing with industrial giants. The stock, trading near $620.94, has outperformed the S&P 500 over the last year. Yet Deere now trades at essentially the same premium multiple as Caterpillar, even while trailing its larger peer on recent revenue growth and margins. Has the market already priced in an ag cycle recovery, or has the stock's multiple expansion gotten ahead of the business?

Deere's stock is priced above its performance.

The market has awarded Deere the highest valuation in its peer group, as it trades at 35.1 times earnings. That's a premium to its closest rival Caterpillar, which trades at 34.6 times earnings. Yet on key metrics, Caterpillar has delivered more. Its revenue grew 18.4% over the last twelve months, far outpacing Deere's 4.2%. Caterpillar also edges out Deere on profitability, with an operating margin of 17.5% versus Deere's 17.4%.

This pattern holds for shareholder returns as well. Caterpillar's stock delivered a +98% return over the past year, while Deere's was a solid, but much lower, +29%. The market is paying more for each dollar of Deere's earnings, even as its larger peer has grown faster, earned slightly more on each sale, and rewarded investors more handsomely.

The market is betting on a recovery that has not yet arrived.

The premium valuation rests on a story of diversification and a cyclical turn. While the core large-agriculture business has been weak, Deere's other divisions are thriving. Management forecasts that its Construction and Forestry segment sales will be up approximately 20% for the full year, while the Small Ag and Turf segment is expected to grow approximately 15%. This performance, driven by infrastructure and data center projects, is providing a powerful offset to the agricultural trough.

Investors are also pricing in management's explicit call that "2026 represents the bottom of the ag equipment cycle." The bull case is that the worst is over for the main business, and the company's resilient earnings through the downturn prove its strength. But there is an honest catch: the company itself is guiding for a "measured recovery rather than a sharp rebound in 2027." The large ag equipment industry in the U.S. and Canada is still expected to decline 15 to 20% this year, and the outlook for South America is also down 15 to 20%. The market is paying for a recovery that, by management's own account, will be gradual.

This measured pace is a key consideration for investors weighing whether Deere's premium valuation leaves sufficient margin of safety. For those who prefer to invest in the broader industrial theme rather than picking a single name, an industrials ETF like XLI offers exposure to the entire sector.

Early orders will test the ag cycle's turning point.

A central question for investors is whether Deere's valuation multiple has expanded ahead of its near-term fundamentals, and early order data could help resolve that debate. The most important watchable is the company's early order program for model year 2027 equipment. This is the first concrete signal of demand for the upcoming year and a direct test of the recovery thesis.

Management noted on its latest call that, so far, the collective orders for planters and sprayers are "up mid single digits compared to the completion of last year's program." If that momentum builds and translates into stronger-than-expected demand for high-horsepower tractors and combines, it would validate the market's optimism. If the final numbers are merely in line with a "measured recovery," the stock's premium valuation will face a serious test.

To keep score on this group beyond today, our full peer-by-peer dashboards for DE track the whole lineup, metric by metric.

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