Deere & Company

Intangible assets and brand: 90/100. Deere’s premium brand, product breadth, and trusted residual values in high-horsepower tractors and combines create customer preference and pricing latitude vs peers. Distribution and service coverage are industry-leading, especially in North America.

Switching costs: 80/100. Deep integration of guidance, JDLink connectivity, Operations Center data, and now retrofit autonomy kits increases lock-in across seasons and machines, while parts catalogs and dealer workflows reduce appetite to switch.

The leap toward autonomy-enabled tillage and expanded combine automation adds software entanglement that accumulates value with use. Network effects: 55/100. Agronomic data sharing and cloud tools have some network effects at the field and fleet level, but the benefits are mostly private to each operator rather than multi-sided at Visa scale.

Cost advantage: 75/100. Scale procurement, manufacturing footprint, and Wirtgen-enabled content in construction drive lower unit costs and better absorption through cycles. Efficient scale: 70/100. Large-ag equipment markets have limited credible global entrants, and dealer territories and installed-base dynamics discourage fragmentation.

Offsetting forces include AGCO’s PTx Trimble mixed-fleet precision platform that lowers vendor lock-in across brands.

Weighted moat view: Multiple moats led by brand/dealers/parts and rising switching costs in precision ag and autonomy support an overall durable but not impregnable position, given right-to-repair and mixed-fleet tech competition risks.

Evidence of pricing strength was clear in the 2021 to 2023 upcycle as Deere captured price to offset inflation; in FY2025 pricing power moderated as volumes fell and discounting normalized in some lines.

Parts and service typically sustain better-than-average price realization, and autonomy and software subscriptions can unlock incremental, latent pricing leverage on a per-acre and per-hour basis over time. Regulatory developments and mixed-fleet solutions temper the ceiling but do not remove it.

On balance, Deere retains solid pricing power in core iron and superior pricing in aftermarket, with potential upside from software as deployments scale.

Core agriculture equipment demand remains tied to farm income, commodity prices, and credit costs, which makes revenue and earnings cyclical. Management’s FY2026 outlook calls for net income of $4.0 to $4.75 billion, reflecting ongoing softness in large ag despite improving conditions in other segments.

Financial Services, parts, and an expanding base of connected software help cushion volatility, but cannot fully neutralize it. Over a full cycle, we expect moderate, uneven growth rather than a smooth compounding profile.

Balance sheet and liquidity are strong for a cyclical manufacturer. Equipment operations historically carry modest net leverage while consolidated debt largely sits in Financial Services and is matched to earning assets.

FY2025 diluted shares averaged about 271.7 million, with 270.4 million outstanding at year end and $7.9 billion remaining under an $18 billion repurchase authorization, providing flexibility through the downturn. Management raised the quarterly dividend to $1.62 in late 2024 and maintained it through 2025, signaling confidence.

Company commentary and filings cite FY2025 consolidated operating cash inflows of about $7.5 billion and a prudently slower cadence of buybacks as the cycle cooled.

Deere’s hierarchy prioritizes reinvestment in precision ag, autonomy, and the Smart Industrial model, alongside targeted M&A such as Blue River in prior years and ongoing upgrades to the tech stack.

Dividends have risen steadily and repurchases reduced the share count meaningfully over the last several years, with repurchase pacing trimmed in FY2025 to respect the cycle. Management targets a strong balance sheet and maintains an A-level credit profile.

We view the blend of internal investment, disciplined buybacks, and a growing dividend as rational and shareholder aligned for a cyclically exposed, moat-heavy franchise.

CEO John May’s Smart Industrial strategy has focused the organization around production systems, dealer enablement, and software layers that improve customer economics. Execution on autonomy, guidance, and connected machine upgrades is tangible and expanding.

That said, management extended the timeline for achieving 10 percent recurring revenue beyond 2030, reflecting realistic pacing and adoption friction in a softer market. Transparency on cycle dynamics and capital allocation has been solid, though reputational and regulatory friction from right-to-repair requires continued engagement.