Deere (DE) reported solid fiscal Q3 results, raised its full-year net income guidance, and its earnings per share likely troughed, but the "torque" in agriculture recovery is likely to be constrained given weak non-US markets, price versus cost pressures, and soft farmer capital expenditure, BofA Securities said in a note Friday.

While Deere lowered its fiscal 2026 sales and margin outlook for the Production & Precision Agriculture segment, encouraging signals for fiscal 2027 include early order programs for sprayers and planters being up mid-single digits, rising take rates on Precision Tech, healthy new inventories, and declining late-model used inventories, according to the note.

The brokerage said it senses some hesitation regarding the farm equipment recovery into next year, as Brazil remains weak and the European market has softened, with Deere lowering its guidance in both regions.

Some profitability overhangs in fiscal 2027 could constrain an "above normal" incremental in the first year of recovery, while pricing still only covers costs, the note said. The company sounds constructive on the Small Agriculture & Turf segment, yet data indicates a slowdown in the low horsepower tractor market, the note added.

BofA kept a neutral rating on Deere and raised its price target to $667 from $607.50.

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