Deere Q2 Beat Masks Deepening Farm Slump, WAIT Rating Intact

What happened

Deere beat Q2 fiscal 2026 EPS of $6.55, above consensus of $5.70-$5.81, on revenue of $13.37B, up 5% YoY. However, the beat was driven by Construction & Forestry strength, while Production & Precision Agriculture continued to weaken, confirming a deepening farm equipment slump. The DeepValue report's WAIT rating remains justified, as the earnings beat does not resolve tariff and right-to-repair overhangs. Management's FY26 guidance of $4.5B-$5.0B net income appears achievable only if construction momentum holds and tariff costs do not rise further. Investors should note that the stock at $577 already prices in this stabilization, leaving limited upside without policy catalysts.

Implication

The Q2 beat confirms the offset thesis—construction strength can compensate for farm weakness—but the deepening farm slump and unresolved tariff/right-to-repair risks mean the WAIT rating is intact until we see confirmation that tariff costs are contained (next 10-Q) and that right-to-repair outcomes remain limited. Entry at $520 offers a better risk/reward; trim above $630 if the stock rallies on transient optimism.

Thesis delta

The Q2 beat supports the construction offset narrative but exposes a deeper farm slump than previously expected, raising the bar for FY26 earnings to hit the high end of guidance. The WAIT rating remains appropriate, as the stock's current valuation already reflects stabilization and does not compensate for policy-driven downside. We still need to see tariff containment and legal clarity before upgrading.