Deere & Company reports its fiscal third-quarter results before the open on Thursday, August 20. The number traders should watch has nothing to do with the quarter itself.
Phase 1 – Market Snapshot
Industrials have broadly tracked the S&P 500’s year-to-date gain, but Deere is not a typical industrial story right now. DE has risen 32% in 2026, more than doubling the index’s performance heading into this release. That outperformance raises the bar significantly. A quarter that merely meets expectations is unlikely to sustain the premium.
Phase 2 – Stocks in Focus: DE
What happened. Deere’s Q2 2026 results, released in May, were a beat-and-fall event. Revenue came in at $13.4 billion, ahead of estimates, and diluted EPS of $6.55 topped Wall Street forecasts. The stock fell 5.2% anyway. Operating margin in Deere’s Production & Precision Agriculture segment was 15.7% versus 22.0% a year earlier, and management left full-year net income guidance at $4.5 billion to $5.0 billion.
For Thursday. Consensus is centered on $4.85 diluted EPS on $10.8 billion in revenue. That would represent a modest year-over-year gain. The company has beaten EPS estimates in three of its last four quarters, and options data currently implies a potential move of about 5% in either direction after the release. Deere has historically surpassed those implied moves in six of its last eight earnings announcements.
Why the headline number is not the real question. JPMorgan cut its price target on DE to $570 from $590 on Friday, maintaining a Neutral rating, and framed the concern precisely: Deere is expected to indicate that end-of-period orders for next year in North America are trending flat to slightly higher. That conflicts directly with consensus models calling for approximately 8% revenue growth in the Production and Precision Agriculture segment for fiscal 2027. If management’s order commentary on Thursday validates the flat order trend, the 25%-plus EPS recovery Wall Street is pricing for fiscal 2027 loses its foundation.
JPMorgan also noted that investor sentiment into the report is skewed negative, a useful framing. That skew is difficult to verify cleanly from public data in real time. Treat it as a positioning tell, not a datapoint.
Phase 3 – Sector Watch
The construction and small agriculture segments have carried Deere through the large-ag downturn, and that story remains intact heading into Thursday. In Q2, Deere raised its Construction and Forestry sales outlook to approximately 20% growth for fiscal 2026, and its U.S. and Canada order book had strengthened more than 60% since November, with over 80% of production slots filled. Management attributed that momentum to infrastructure spending, rental fleet replacement, and data center project demand.
Large agriculture is a separate and deteriorating picture. New Association of Equipment Manufacturers data released this week shows U.S. tractor sales dropped 10.9% in July 2026 versus a year earlier, with four-wheel-drive tractor sales down 38.7%. Year-to-date tractor sales stand at 105,185 units, down 13.1% from 2025. Combine sales fell 5.3% in July. Canadian numbers are only marginally better. Equipment manufacturers broadly project a 15% to 20% decline for North America in large agriculture for all of 2026.
The divergence between construction strength and large-ag weakness is the structural story Deere has managed for three quarters. Thursday’s call will tell traders whether that gap is narrowing or widening.
Phase 4 – Catalyst Calendar
- Thursday, August 20, pre-market: Deere Q3 2026 earnings release, followed by conference call at 9:00 a.m. Central Time. End-of-period order commentary for large agriculture in North America is the single most consequential data point.
- Full-year guidance update: Deere maintained its $4.5 billion to $5.0 billion net income range through Q2. Any revision Thursday, upward or downward, will reset the fiscal 2027 recovery thesis immediately.
- UAW contract situation: The UAW’s agricultural implement department publicly stated in late July that Deere cannot ask the union for a favor. A labor disruption ahead of any large-ag demand recovery would compound margin pressure at the worst possible moment.
- Purdue/CME Ag Economy Barometer: The July reading rose 13 points to 126. Farmer sentiment improving is a leading indicator, but it has not yet translated into equipment orders.
Phase 5 – Technical Radar
DE set an all-time high of $674.19 on February 19, 2026. The stock has since pulled back roughly 11% from that level heading into the quarter. Support sits in the low-$580s, a level that held twice during the May post-earnings selloff and again in early July. A guidance reduction or bearish order commentary Thursday could test that zone within the session.
On the upside, a constructive order signal plus any upward revision to full-year guidance would put the February high back in play. Analyst price targets span a wide range: JPMorgan is at $570 with a Neutral; D.A. Davidson holds a Buy at $685; Truist has a Buy at $812. The dispersion in targets reflects genuine disagreement about whether fiscal 2027 is a 25%-plus earnings recovery or a flat year.
Phase 6 – Risk Radar
- The FY2027 consensus gap. Analysts broadly model 25%-plus EPS growth for fiscal 2027. That recovery depends on large-ag normalization. Flat North American end-of-period orders would directly undercut that forecast and likely trigger target-price cuts across the coverage universe.
- Tariff overhang. Deere absorbed roughly a $200 million tariff hit in Q3 fiscal 2025 and estimated a nearly $600 million full-year fiscal 2025 impact. Management has flagged potential for elevated tariff costs beyond fiscal 2025. Any escalation in agricultural trade policy could widen that exposure.
- Inventory. Tractor inventories stood at 6.2 months on hand at the end of June, with combine inventories ticking up 4% that month to 3.0 months. Elevated dealer inventory keeps pricing power under pressure and discourages new production orders.
- Farmer sentiment versus action. The Purdue/CME barometer improved in July, but elevated input costs remain the top stated concern among farmers. Sentiment rising does not automatically translate to equipment purchases when financing costs remain high.
Phase 7 – The Cheat Sheet
- Top Market Theme: Deere’s Q3 beat is already partially priced into a 32% year-to-date gain. The fiscal 2027 recovery story is what the stock is actually trading on Thursday.
- Stock to Watch: DE. The options market prices a 5% move. The company has historically exceeded that range. Order commentary on large agriculture is the binary catalyst.
- Sector to Watch: Agricultural equipment. AEM July data confirmed broad-based weakness. Any constructive signal from Deere’s order book would move the entire sector, including AGCO.
- Biggest Risk: Flat North American end-of-period orders for fiscal 2027, which would invalidate the 25%-plus consensus EPS recovery and expose the stock’s elevated valuation.
- Biggest Opportunity: If Deere’s Construction and Forestry momentum continues and management raises full-year guidance even modestly, the bearish positioning heading into Thursday creates a sharp covering event.
- One Thing to Remember: Deere beat on both revenue and EPS in Q2 and the stock fell 5.2%. The number Thursday is not the report. It is the first data point on fiscal 2027 orders.
