Deere’s Ag Cycle Is Turning, But Can Profitability Follow?

Deere is calling the bottom of the agriculture cycle, but on its latest earnings call, analysts pressed for the fine print on what the recovery will actually look like.

After a quarter where it beat expectations and raised its full-year outlook, Deere (DE) stock has climbed to within 4% of its 52-week high. But on its latest call with analysts, the conversation quickly moved past the strong results from its construction and turf divisions. The entire Q&A kept circling one central question: now that management sees the bottom likely in place for its core large-agriculture business, what does the 2027 recovery actually look like in terms of pace and profitability?

A Recovery Signal, But How Loud Is It?

The bull case for a recovery rests on the first hard data for next year: the early order program for model year 2027 equipment. If the cycle has truly turned, this is where you would see it first. Management announced that, so far, orders are up “mid single digits” compared to last year’s program. That is the green shoot investors were looking for, but it immediately raises the question of whether this is a real rebound or just a modest bounce off a deep bottom. The entire “cycle is turning” thesis hangs on the quality of this signal.

Management’s answers were more confident than explosive. They repeatedly framed the order book as an “encouraging signal” that reinforces their view of a “measured recovery, rather than a sharp rebound in 2027.” When pressed for details, the color was less about a broad surge in demand and more about farmers opting for higher-tech equipment. For instance, factory adoption of the company’s See & Spray technology is expected to nearly double. This dynamic—where high-tech adoption within ag, alongside steady construction and turf demand, helps offset volume weakness elsewhere—is a key part of the current investment case, and we explored what separates DE stock from its peers in a separate piece. The response left the impression that while the direction is positive, the velocity is still in question.

The Tariff Answer Had A Number In It, And It’s A Headwind

The other side of the 2027 equation is profitability. This year’s results were helped by $382 million in tariff refunds, a one-time benefit that will not repeat. The obvious worry, which one analyst put squarely to management, is what happens to the bottom line when that tailwind becomes a headwind. This is not a vague risk; it is a direct, quantifiable drag on next year’s earnings.

Management quantified the hit directly: after booking $382 million in tariff recoveries this fiscal year—including $110 million in Q3—those credits roll off entirely in fiscal 2027, creating an immediate, net profit drag of hundreds of millions of dollars before accounting for any new tariff expenses.

Because these credits will drop to zero next year, any financial model for 2027 must factor in this known margin pressure, making the strength of the underlying operational recovery even more critical.

What To Watch: The Order Book’s Final Tally

Deere’s management team effectively confirmed the ag cycle has likely bottomed, but the recovery looks gradual and comes with a known earnings drag. The company’s diversification is providing a crucial bridge, but the core Production and Precision Ag segment is likely to remain the key driver of the stock’s next major move. For investors who like the industrial recovery theme but are wary of single-stock risk, an industrials ETF provides broader exposure.

The one thing to monitor for greater clarity on the debate is the final tally from the early order program. The window for planters closes at the end of September. On its next call, the company will provide a final update. Whether that “mid-single-digits” growth holds, accelerates, or fades will be the clearest signal yet of the true shape of Deere’s 2027.

Where One Stock’s Open Questions Fit A Bigger Plan

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