One company. One framework. One lesson.

This week: Deere (DE)

Score: 70/100 — SOLID

A note before the scorecard: Deere is the Iowa pick. It has five factories in this state, in Waterloo, Ankeny, Davenport, Dubuque and Ottumwa, the biggest manufacturing footprint of any company this framework is likely to score. One honest footnote for Dubuque readers: mid-frame skid steer and compact track loader production is moving from Dubuque Works to a new plant in Ramos, Mexico, during 2026. The Iowa roots are real. So is the footnote. Deere is also the perfect test of the framework's hardest skill: scoring a cyclical, a business whose profits rise and fall with its industry's cycle (here, the farm economy). The market sees a 35 P/E and calls it expensive. The framework sees trough earnings, profits at the bottom of the cycle, and asks a different question.

P.S. from last week: nothing new on Alphabet. It reports third-quarter earnings Wednesday, Oct. 28, after the close, and the re-grade comes after that, with the real numbers. The 68/100 stands until then.

Moat: 22/30. Start with what's undeniable: roughly 2,050 independent dealer locations across the U.S. and Canada, equipment sold in more than 100 countries, and a parts network with central warehouses on three continents plus depots in eleven more countries. When your tractor dies at harvest, you don't comparison-shop. You call the green dealer, because he has the part and the software key. That's a moat. A real one.

Now the honest part, the part the bulls skip: the moat is narrowing, and this time it's the law doing it. In July, Deere settled the FTC's right-to-repair case. For ten years, owners and independent shops get the same repair tools and software Deere gives its dealers, and Deere pays $1 million to the five states that joined the case. Separately, Deere agreed to a $99 million settlement of a farmers' class action that also requires repair access; the court's final fairness hearing is set for Jan. 19, 2027. Then in early October, the FTC and USDA opened a joint inquiry into the whole farm-equipment market, and dealer territories are explicitly in scope. Read that carefully. The settlements hit the service side of the moat. The inquiry could hit the distribution side, the dealer network itself. Neither kills the moat. Both tax it. A taxed moat is still a moat, but you don't get to score it like it's 2019.

The growth story is precision ag, and the numbers are exciting: 520 million engaged acres across 1.2 million connected machines, 190 million highly engaged acres, and See & Spray covering 5 million acres this year (up from 1 million last year) with herbicide savings around 50%. But stay disciplined. Deere's own 10-K says its software-subscription revenue "did not represent a significant percentage" of 2025 revenues. The technology is real. The technology revenue isn't, yet. The framework scores the business you have, not the one in the slide deck.

Management: 15/20. John May has run Deere since November 2019, and his report card has two lines. Line one: the FY2023 peak, with $61.3 billion in revenue, $10.2 billion in net income and $34.63 a share. Records across the board. Line two matters more: he rebuilt the trough. By management's own description, FY2025 was a trough year, running below 80% of mid-cycle. Deere still posted a 21.7% operating return on assets and a 12.6% equipment margin, beating the 2009 and 2016 troughs by more than 40% and 58%. In plain English: the bottom of this cycle was far more profitable than the bottom of the last two. That's structural, and that's management. When the cycle turns, that higher base turns with it.

Capital allocation is shareholder-friendly, with one yellow flag. The dividend has risen every year since FY2020, straight through the downturn. But buybacks fell from $7.2 billion in FY2023 to $1.1 billion in FY2025, then to zero in Q4. A buyback is a company buying its own shares, and it's smartest when the stock is cheap, which for a cyclical usually means near the bottom. Some caution here is defensible, but $7.9 billion of authorization is still sitting unused. On operations, management says 2026 marks the bottom of the large-ag cycle, and it's deliberately underproducing to keep dealer inventories clean going into FY2027. That's the right call at the bottom. Tariffs are the wild card: roughly $600 million absorbed in FY2025, about $1.1 billion expected in FY2026, with $382 million clawed back so far. They're managing it, not ignoring it. Fifteen, not eighteen: great operators, but the buyback pause and the tariff bill keep it out of the top tier.

Financial Health: 19/25. This is what a well-run cyclical looks like at the bottom. Revenue fell 25% from peak to trough ($61.3 billion to $45.7 billion). Net income was cut in half ($10.2 billion to $5.0 billion). And every segment stayed profitable: large ag at 15.4% margins, small ag at 11.8%, construction at 9.0%. Operating cash flow never came close to zero. Free cash flow, the cash left after running the business and paying for new equipment, ran $6 billion to $7.6 billion a year straight through the worst of it. The $64 billion debt number looks scary until you learn most of it funds John Deere Financial's lending book, the loans customers use to buy the equipment. The equipment business itself is conservatively financed, and the credit raters (A+/A1/A, all stable) agree. And Q3 already showed the turn: revenue up 5%, EPS up 7%, full-year guidance raised. Nineteen: docked for the size of a 50% earnings drop, but this is a fortress that got tested and held.

Valuation: 14/25. Lean in, because this is where people get Deere wrong, and it's the point of this issue. The stock trades around $632. The P/E ratio is the stock price divided by one year of profit per share. Deere's is about 35 on trailing earnings of $18.00. Thirty-five times! For a tractor company! Sounds crazy. It isn't. FY2025 earnings were $18.50, and management itself calls that a trough year. For cyclicals, the P/E is usually highest at the bottom: the multiple looks most expensive right when profits are most depressed. Screen on trailing P/E alone and you'll tend to buy cyclicals near the top and sell them near the bottom.

So do what the framework does: price the cycle, not the twelve months. On peak FY2023 earnings ($34.63), you're paying about 18x. On a rough mid-cycle average (about $26.57), about 24x. The stock sits roughly 12% below its September all-time high of $721, yields about 1%, and the dividend rose straight through the trough. Is 18x peak earnings a bargain? No. It's a fair price, for a business that's structurally better than the last cycle's, bought near the bottom of this one. Fair price, trough earnings, turning cycle: that's a 14, not a 20. The margin of safety here is the cycle itself, not the multiple. Don't ask for both.

Red-flag check: 0 of 5. Accounting manipulation: no. Management integrity issues: no. Deere settled the repair cases without admitting wrongdoing, and we score that as a moat problem, not a character problem. Structural industry decline: no, farming runs in cycles, and this is a down-cycle, not a dying industry. Debt distress: no, most of the debt funds the lending book, and the credit ratings are A-grade. Excessive customer concentration: no, it sells through roughly 2,050 dealer locations to farmers and builders in more than 100 countries. (One to watch: regulators. The FTC and USDA farm-equipment inquiry is taking public comments through Dec. 7, and dealer territories are on the table.) No cap applies.

Verdict: 70/100 — SOLID. Look at the board: Costco 75, Deere 70, Alphabet 68. Deere is the first verdict on this board that reads: good business, fair price, right moment in the cycle. Not a bargain. Not a trap. A well-run cyclical at a fair price near the bottom, with the cycle starting to turn, and the framework respects that more than a low multiple on shrinking earnings. Own it at a fair price or wait for a better one. Just don't call it expensive because you read the wrong twelve months.

The system lesson: "Price the cycle, not the twelve months." Every P/E is a fraction: price over earnings. Most people stare at the price and never question the earnings. For a cyclical at the bottom, trailing earnings aren't normal earnings. They're the worst twelve months. Thirty-five times trough earnings can be cheaper than fifteen times peak earnings. The math isn't hard, but you have to know where you are in the cycle, and that takes work. Before you call anything expensive, ask: expensive compared to which earnings? The cycle is the context. Price the cycle, not the print.

Disclosure: The author does not own shares of Deere (DE) as of publication.

The Iowa Investor is education, not financial advice. Every score reflects the framework's judgment, not a recommendation. Do your own work.

The fine print: The Scorecard is published by Iowa Investor (KEOWA, LLC) for educational purposes only. Nothing in this newsletter is personalized investment advice or a recommendation to buy or sell any security. Scores are opinion, built from public information believed reliable but not guaranteed, and are not predictions of future results. The author may hold positions in companies mentioned here; any position in the featured company is disclosed in each issue. Investing involves risk, including loss of principal. Do your own research or consult a licensed advisor before making investment decisions.

Data as of Oct 19, 2026; fundamentals through Q3 FY2026 (reported Aug 20, 2026). Price ~$632 (Monday); valuation anchors recomputed from send-week pricing. Score: Moat 22, Management 15, Financial Health 19, Valuation 14 — 70/100 SOLID.