Deere (DE)

The sleeper story is the 10% underproduction cushion in Small Ag and Construction & Forestry that creates automatic volume leverage for 2026 - a manufacturing earnings tailwind hidden beneath the demand recovery debate. While everyone fixates on when North American ag turns, DE has built production optionality that kicks in regardless. The obvious headline about tariff headwinds ($600M annually) is real but manageable given their pricing power and cost reduction efforts. However, the binding constraint remains late-model used inventory in North America, which required expensive pool fund interventions that hit margins this quarter. As CFO Jepsen admitted: 'Certainly, we have more work to do to improve used inventory levels.' My view changes if early order programs for planters and combines show materially better results than the 20% down sprayer EOP - that would signal genuine demand stabilization versus just seasonal noise.