Deere (DE)

The market will focus on the earnings beat, but strip out the $272M tariff refund and DE still delivered 14.4% equipment margins in a trough environment, proving their structural improvement thesis. The real story is dual-speed recovery: Brazil cratering (guide cut from -5% to -15%) while North America replacement demand finally stirs with large tractor orders extending into Q4 for first time in this cycle. Construction margins expanding to 14.8% despite pricing wars shows the pricing discipline is returning. The binding constraint isn't demand (order books up 60% in C&F) but production capacity and Brazil macro deterioration. Brent Norwood's comment that 'we expect to see some level of replacement come back in 2027' is the most important forward guidance - they're calling the bottom. My view changes if Brazil stabilizes faster than expected or North American used inventory reduction stalls.