Deere (DE)

The sleeper story is margin power hidden by tariffs - DE just delivered 12.6% equipment margins while absorbing $600M in tariff costs at trough volumes, suggesting 17-18% potential when cycles normalize. The obvious headline of challenging 2026 guidance misses the key insight: they're calling this the bottom of the cycle with 2-4% pricing power already locked in through early order programs. The binding constraint isn't demand - it's tariff absorption speed, with $1.2B in 2026 costs requiring 18-24 months to fully price through. Most revealing quote from Jepsen: 'This level of performance reflects the structural improvements we have made to the business over the last several years.' My view changes if used inventory metrics show deterioration when they restore full transparency or if Q2 2026 margins don't show sequential improvement despite easier comps.