Stock Analysis & Valuation Deere & Company (0R2P.L)

• Previous Close: £524.98
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, £	Upside, %
Artificial intelligence (AI)	244.00	-54
Intrinsic value (DCF)	175.52	-67
Graham-Dodd Method	83.60	-84
Graham Formula		n/a

Strategic Investment Analysis

Company Overview

Deere & Company (NYSE: DE), a global leader in agricultural, construction, and forestry equipment, operates through four key segments: Production and Precision Agriculture, Small Agriculture and Turf, Construction and Forestry, and Financial Services. Founded in 1837 and headquartered in Moline, Illinois, Deere is renowned for its advanced machinery, including tractors, combines, excavators, and precision farming technology. The company serves diverse markets, from large-scale grain producers to small farmers and construction firms, while its Financial Services segment provides essential financing solutions. With a market cap exceeding $139 billion, Deere leverages innovation, brand strength, and a vast dealer network to maintain dominance in the industrial capital goods sector. Its commitment to sustainability and smart farming technologies positions it as a critical player in modernizing agriculture and infrastructure development worldwide.

Investment Summary

Deere & Company presents a compelling investment case due to its strong market position, consistent revenue growth ($50.5B in FY 2024), and robust profitability ($7.1B net income). The company benefits from cyclical demand in agriculture and construction, supported by its high-margin precision farming solutions. However, investors should note its elevated debt ($65.5B) and exposure to commodity price fluctuations. With a beta of 1.09, Deere is slightly more volatile than the market, but its 4.4% dividend yield (based on $6.18/share) and leadership in automation technologies offer long-term appeal. Capital expenditures ($4.8B) reflect ongoing R&D investments, which could drive future competitiveness.

Competitive Analysis

Deere & Company’s competitive advantage stems from its unparalleled brand recognition, extensive dealer network (over 3,700 locations globally), and technological leadership in precision agriculture (e.g., AutoTrac, See & Spray). Its integrated equipment-financing ecosystem creates sticky customer relationships. In agriculture, Deere’s scale allows R&D investments ($2.3B annually) that outpace rivals, while its Construction segment benefits from durable equipment lifespans and a strong North American presence. However, the company faces pricing pressure from low-cost Asian manufacturers and relies heavily on the North American market (60% of revenue). Its focus on high-tech solutions differentiates it from commoditized competitors but exposes it to semiconductor supply chain risks. Deere’s vertical integration (e.g., in-house engine production) provides cost control, while its Financial Services segment contributes stable earnings (12% of operating profit).

Major Competitors

• CNH Industrial (CNHI): CNH Industrial (NYSE: CNHI) competes with Deere in agriculture (Case IH, New Holland) and construction equipment. Its strength lies in European market penetration and a broader commercial vehicle portfolio (Iveco). However, it lags in precision tech R&D and has lower margins (7% operating margin vs. Deere’s 18%). Recent spin-offs may sharpen focus but reduce diversification.
• AGCO Corporation (AGCO): AGCO (NYSE: AGCO) targets mid-tier farmers with brands like Massey Ferguson and Fendt. It excels in grain storage solutions and has a strong European presence. However, it lacks Deere’s financing arm and relies more on third-party dealers. AGCO’s smaller scale limits R&D budgets but allows agility in niche markets.
• Caterpillar Inc. (CAT): Caterpillar (NYSE: CAT) dominates global construction/mining equipment, overlapping with Deere in compact machinery. CAT’s broader geographic reach (50% non-US sales) and stronger aftermarket parts business (higher-margin) are advantages, but it lacks Deere’s agtech ecosystem. CAT’s cyclical exposure to mining makes it more volatile.
• Kubota Corporation (KUBTY): Kubota (OTC: KUBTY) threatens Deere in compact tractors and rice farming equipment, especially in Asia. Its cost-efficient manufacturing and strong irrigation systems are strengths, but it lacks Deere’s AI-driven precision ag tools. Kubota’s weaker brand in North America limits upside.
• Terex Corporation (TEX): Terex (NYSE: TEX) competes in construction cranes and materials handling. It’s more specialized than Deere’s diversified portfolio but benefits from infrastructure spending trends. Terex’s smaller size restricts R&D but allows focus on high-growth niches like aerial work platforms.