Can Construction and Forestry Fuel Deere's Long-Term Growth?

Deere & Company DE raised the lower end of its fiscal 2026 net income forecast to $4.75-$5 billion from the earlier $4.5-$5 billion. The updated guidance reflects strong results delivered in the third quarter of fiscal 2026.

Net sales from Deere’s equipment operations were $11 billion in third-quarter fiscal 2026, up 6.2% from the year-ago quarter’s $10.36 billion. This reflects strength in Small Agriculture and Turf and Construction and Forestry despite weakness in Production and Precision Agriculture. Construction and Forestry net sales were $3.62 billion, up 18% year over year, primarily on higher shipment volumes and favorable price realization. Operating profit surged 84% year over year to $436 million, aided mainly by favorable price realization, partially offset by higher selling, administrative, general and R&D costs.

Deere is gaining from strong growth in both its precision construction technologies and construction portfolio. The company expects the Construction and Forestry segment to be an increasingly important contributor to Deere's long-term growth strategy, driven by solid end market demand, healthy customer backlogs and the rising adoption of Deere’s technology solution.

Deere expects Construction and Forestry sales to increase 20% in fiscal 2026. The segment’s operating earnings are expected to be 10.5-11.5%, marking an increase of 9% from that reported in fiscal 2025.

The company expects industry sales for earthmoving equipment in the U.S. and Canada construction equipment to increase 5-10% in fiscal 2026, and compact construction equipment to increase 5%. The upside will be driven by solid demand from large-scale infrastructure, data center and energy-related projects. Even though global forestry sales are expected to be down 10% in the year, it will be offset by a 10% rise in global roadbuilding market sales.

The company continues to view 2026 as the bottom of the current agriculture equipment cycle. Early order program trends, improving used-equipment inventories and increased customer adoption of advanced technologies underpin its confidence in the company's longer-term positioning.

Recent Performance & Outlook of Deere’s Peers

AGCO Corp.’s AGCO net sales declined 1% year over year to $2.61 billion in the second quarter of 2026. Adjusted operating income fell 21.1% to $172 million. AGCO Corp’s adjusted operating margin declined 170 basis points to 6.6% due to weaker sales and factory absorption in Latin America, along with tariff-related costs.

AGCO Corp expects adjusted earnings of $5.50-$5.75 per share compared with the prior stated $6.00. It anticipates 2026 net sales between $10.1 billion and $10.2 billion, while the adjusted operating margin is expected to be 7.5%.

Lindsay Corporation’s LNN sales were $160.8 million, down 5% year over year in the third quarter of 2026. Irrigation softness outweighed infrastructure growth. The quarter reflected persistent demand challenges in North America and Brazil. 

Lindsay expects the irrigation market conditions in the United States to remain soft as growers await greater trade certainty and an improvement in commodity prices. Brazil is expected to return to growth, supported by secular demand for irrigation investments. Lindsay also expects to recognize $70 million in revenues from the MENA irrigation project in fiscal 2026. In Infrastructure, the company anticipates continued growth in road safety products.

DE’s Price Performance, Valuations & Estimates

Deere shares have gained 34.4% in a year compared with the Zacks Manufacturing - Farm Equipment industry’s 28.1% growth. In comparison, the broader Zacks Industrial Products sector has returned 20.4% and the S&P 500 has rallied 22.9%. 

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Deere is currently trading at a forward 12-month price/earnings of 30.06X, a premium compared with the industry’s 27.55X. It is also higher than DE’s five-year median of 27.53X.

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The consensus estimate for fiscal 2026 earnings suggests a year-over-year decline of 1.5%. The same for fiscal 2027 indicates growth of 22.4%. The Zacks Consensus Estimate for 2026 sales implies 8.9% growth. The same for fiscal 2027 suggests growth of 9.1%.

EPS estimates for 2026 and 2027 have moved south over the past 60 days.

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Deere currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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