UBS Remains Bullish on Deere (DE) Despite Weakness in Farm Equipment Cycle: Here’s Why

UBS Remains Bullish on Deere (DE) Despite Weakness in Farm Equipment Cycle: Here’s Why

Bob Karr

Thu, September 3, 2026 at 10:32 PM GMT+3 3 min read

• DE -0.13%

The broader agricultural equipment industry is witnessing a cyclical slowdown as softness in equipment demand is impacting the manufacturers. However, there are some signs of stabilization amidst improvement in used-equipment inventories and early-order trends becoming constructive. For Deere & Company (NYSE:DE), the possibility of 2026 marking the bottom of the current cycle might be more critical than the near-term earnings pressure.

Deere's Results Surpassed Expectations

Deere & Company (NYSE:DE) posted a stronger-than-expected quarter amidst tough economic conditions. The company's Q3 2026 worldwide sales and revenues saw an increase of 5% to $12.6 billion, with net income witnessing a rise to $1.38 billion, or $5.10 per share. For the first 9 months, however, net income fell to $3.81 billion from $3.96 billion for the similar period last year. This was mainly because of continued pressure due to an agricultural downturn.

The company anticipates FY 2026 net income of between $4.75 and $5.00 billion, demonstrating that it is managing through the downturn and is not waiting for demand recovery.

UBS Maintains Buy

UBS analyst Steven Fisher kept a "Buy" rating and reduced the price objective to $728 from $732. The analyst believes that Deere & Company (NYSE:DE)'s earnings surpassed the muted expectations even after adjusting for tariff refunds. Furthermore, the company's management slightly increased the full-year guidance and highlighted that the agricultural equipment cycle could bottom out moving forward.

The analyst opines that 2027 will be the transition year, while resilient growth will emerge in 2028. Notably, early order trends and improvement in used-equipment inventories offer support for the outlook.

Technology Should Aid the Next Leg of Growth

Deere & Company (NYSE:DE)'s long-term opportunity goes over and above than just selling equipment. Customer adoption of advanced technologies has increased, which can further strengthen the company's competitive position as equipment demand recovers.

Notably, precision agriculture and technology-enabled farming can increase customer productivity. At the same time, they will create greater differentiation from conventional equipment manufacturers.

The Downside Risk

Bears believe that the recovery is not guaranteed. While farm economics are still under pressure, the company's largest segment continues to witness lower volumes. Also, softer conditions in Brazil and Europe are resulting in further uncertainty. Tariffs can be a cost risk, as the company expects significant net tariff costs in 2026 and 2027.

Short Interest and Hedge Fund Sentiments

Deere enjoys a favorable short-interest profile, with ~1.88% of its float sold short compared to ~4.62% for CNH. This implies lower bearish positioning and better investor confidence in the company's capability to withstand the agricultural downturn and benefit from the upcoming upcycle.

As per Insider Monkey's database, 59 hedge funds were long on Deere at the end of Q2 2026 compared to 62 funds at the end of Q1 2026.

Conclusion

Deere & Company (NYSE:DE)'s recent quarter doesn't signal that the agricultural downturn has ended. Rather, it reflects that the company has been managing through the trough. If 2026 sees the bottom of the cycle, improvements in order trends and better construction demand are likely to place the company for a strong earnings recovery.

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