Deere shares rose more than 3% on Monday after Baird analyst Mircea Dobre upgraded the stock from Neutral to Outperform and raised his price target to $800 from $640. That target implies roughly 27% upside from Friday’s close and sits well above the current sell-side consensus of around $665. The upgrade did not happen in a vacuum.
Two weeks ago, Deere posted its first year-over-year profit gain in roughly three years. Fiscal Q3 revenue came in at $12.61 billion. EPS was $5.10. Management raised full-year net income guidance to $4.75 billion to $5 billion and lifted equipment-operations cash flow expectations to $5 billion to $5.5 billion. The company also said it sees fiscal 2026 as the bottom of the agricultural equipment cycle. That language matters.
The quarter itself was carried by a division most investors associate with John Deere as an afterthought: Construction and Forestry. Net sales in that segment rose 18% to $3.62 billion, and operating profit surged 84% to $436 million. Operating margin expanded to 12.1% from 7.7% a year earlier. Infrastructure spending, data center builds, and energy project activity are all feeding that order book. Management expects Construction and Forestry full-year sales to grow approximately 20%.
The agricultural equipment division remains under pressure. Production and Precision Agriculture, Deere’s largest segment, saw sales decline as large farm machinery demand softened in North America, South America, and Europe. That weakness is exactly why the stock spent most of the summer range-bound despite the construction strength.
The Baird Thesis
Dobre’s upgrade is not a construction story. It is a 2027 agriculture recovery call. Mid-2027 corn futures are now above farmer breakevens, with soy improving as well. Tightening stocks-to-use ratios and deteriorating crop conditions are building the case for sustained commodity price strength into next year. Stronger farm margins historically translate into equipment purchasing 12 to 18 months later.
Early order program data is beginning to confirm the thesis. Planters and sprayers are showing mid-single-digit growth versus last year’s completed program. Deere also acquired construction technology company Tenna for $439 million in February 2026, extending its precision fleet management capabilities and diversifying revenue further from row-crop cycles.
What Could Go Wrong
The valuation is not cheap. Deere trades at roughly 34 times trailing earnings after a 35% year-to-date run. The forward multiple assumes the agricultural recovery arrives on schedule in 2027. Any delay, whether from a commodity price reversal, South American weather, or continued dealer inventory normalization, compresses that timeline and presses the multiple. The company also expects direct tariff costs of approximately $1.1 billion for fiscal 2026. Union contract negotiations heading into 2027 add labor cost uncertainty. Baird’s $800 target leaves little room for execution error.
The Bottom Line
Construction equipment has already turned. The ag cycle bottom appears to be forming. Baird is betting that investors get ahead of a 2027 volume recovery now, before it is obvious in the quarterly numbers. With a raised guidance range and commodity futures finally cooperating, Deere offers the clearest fundamental inflection story in the industrials today. The 34x multiple is the honest argument against it. The question is whether the market waits for the recovery to show up in the numbers, or prices it in while it is still early.
