When you think about artificial intelligence, the first company that comes to mind is probably not Deere & Co. (DE 1.15%). Yet, the AI revolution is heading into farming and manufacturing, and Deere is leading the way. The farming equipment company is making a strategic pivot into AI and autonomous machinery to help battle rising costs for farmers throughout the agricultural sector.
NYSE: DE
Key Data Points
Farming of the future
Deere was the first to market with its autonomous tractor. The company's technology increases farm productivity by 15% to 20% while reducing fuel and labor costs by 6%. Deere also has precision agriculture technology to make farmers far more efficient and less wasteful of resources.
Even more importantly, Deere can upgrade older equipment with its new technology, lowering adoption barriers and allowing farmers to keep their current machinery. This upgrade option is a significant competitive advantage.
Image source: Getty Images.
It's no secret that U.S. agriculture has struggled over the past couple of years. There's a shortage of labor, and for smaller farmers, profit has all but disappeared. Costs, including fluctuating tariffs, have squeezed margins. This financial pressure directly impacts Deere and its ability to sell equipment. For fiscal year 2025, Deere's worldwide net sales decreased 12%.
The good news is that many analysts see 2026 as the trough in this latest farm cycle. If that's indeed the case, Deere looks like an excellent buy right now, based on its fundamentals. Yes, the full picture for 2025 wasn't great, but metrics such as net sales and revenue showed improvement in the fourth quarter.
Deere needs agriculture to recover
Deere's stock has done very well to start 2026, rising nearly 30% as of Feb. 17. The stock's forward P/E ratio has also jumped, and is now around 32. This multiple is above the industrials sector's average of 26.
Deere's dividend isn't exactly high-yield, but it is absolutely consistent. Since 2020, Deere's dividend has increased from $2.40 per share all the way to its current level of $6.48 per share.
There are a lot of unknowns still left to work out in the farming rebound. The pivot into software and AI provides Deere with a high-margin business that can help improve the company's overall financials. The fact that the company can retrofit equipment with new software and AI is hugely important.
For some, Deere may seem slightly overpriced right now, especially considering the tough industries it operates within. However, if investors can stomach the unknowns in the farming recovery, Deere and its technology prowess could be a real winner in the upward swing over the next several years.
