Buy This Wide-Moat Stock While It’s Trading at a Rare Discount

One of the most recognizable names in agricultural and construction, Deere has carved out a wide economic moat and maintains a fortresslike balance sheet. Despite ongoing weakness in ag markets, we think this high-quality company is executing well; in fact, we recently inched up our fair value estimate for the stock. We think the current share price weakness presents a buying opportunity. Deere’s stock is trading 16% below our $550 fair value estimate, which is rare: More often than not, this market leader has traded at a premium the past several years. This undervalued stock appears on our new list of 10 Best Blue-Chip Stocks to Buy for the Long Term. It’s also one of Morningstar Chief US Market Strategist Dave Sekera’s 5 Stocks to Buy Before the Market Rally Stalls.

Deere is one of the world’s leading providers of machinery serving agricultural, construction, and other industrial end markets. The company has increasingly invested in connecting its machines to GPS and other technology architecture to boost their performance in the field. In 2022, the company introduced a set of four-year plans to incorporate more connectedness in its installed base as well as enhance sustainability initiatives via increased use of recycled materials and reducing its carbon footprint. Management’s ambitions include a $150 billion incremental increase to Deere’s total addressable market. The company is well on its way to achieving its objectives over the 2026 and 2030 time frames.

Key Morningstar Metrics for Deere

• Fair Value Estimate: $550
• Star Rating: 4 Stars
• Economic Moat Rating: Wide
• Uncertainty Rating: Medium

Economic Moat Rating

We assign Deere a wide moat rating, underpinned by intangible assets and switching costs. Through its long operating history, the company has cultivated an iconic brand and significant customer loyalty. Deere is the preeminent global supplier of heavy agricultural machinery, with more than 50% share in its core North American market. For decades, the company has produced best-in-class agricultural equipment, leading to the largest installed base in the industry. It has been at the forefront of innovation in agriculture, allowing farmers to do more with less. Deere’s mission-critical equipment and focus on its installed base through aftermarket and service offerings keep customers from switching. Also, customers invest a significant amount of time and capital in machinery, creating additional friction in switching products.

Read more about Deere’s moat rating.

Fair Value Estimate for Deere Stock

Our $550 fair value estimate equates to about 27 times earnings and an enterprise value/EBITDA multiple of about 19 on our 2025 estimates. In fiscal 2024, Deere faced significant headwinds in its core agricultural segments, which dropped more than 20%, while the construction and forestry segment showed a low-double-digit decline. The company expects more declines in fiscal 2025, given ongoing weakness in agriculture and still-elevated levels of inventory in the dealer channel. We anticipate ample recovery across segments in 2026 and beyond. On a blended basis, our 20.9% midcycle margin for the company is only modestly higher than management’s 20% target. The 8.6% weighted average cost of capital derives from a market-average cost of equity and the company’s current capital structure.

Read more about Deere’s fair value estimate.

Risk and Uncertainty

Deere’s operating results are very strongly tied to agriculture end markets and farm profitability. Farm income derives from many variables, including but not limited to the prices of key commodities (for example, corn, soybeans, and wheat), input costs (such as seeds, fuel, fertilizers, and pesticides/herbicides), and crop yields (output). Downturns can extend longer than 12 months and result in contractions of more than 20%. Like many other cyclical companies, Deere has made concerted efforts to reduce the through-cycle volatility of its results.

Read more about Deere’s risk and uncertainty.

Deere Bulls Say

• Deere could expand its addressable market via ongoing product innovation to management’s target of $150 billion and gain share.
• If the company retrofits a greater proportion of the hundreds of thousands of machines in its installed base with margin-accretive connected technology, it will structurally improve margins.
• 2025 is likely the trough of the agriculture cycle, with stronger revenue and earnings growth ahead.

Deere Bears Say

• Global competitors could increase market share via either product innovation or lower-cost offerings.
• Management could overstate its growth potential, and customers may not be willing to pay premium prices for Deere’s solutions.
• Operating results follow the agriculture cycle, so Deere’s performance could erode along with its customers’

This article was compiled by Susan Dziubinski and Sylvia Hauser. Data as of Oct. 21, 2025, close unless otherwise noted.