Will any major credit rating agency place Deere on negative outlook or downgrade its senior unsecured rating by December 31, 2026?

Constructing a revised probability tree using Q1 FY2026 data. P(sustained stress) was ~30% in the prior prediction; Q1 execution ahead of plan (Equipment Ops margin 5.9% vs guided low single digits), NI guidance raised to $4.5-5.0B floor, and FS credit quality improving collectively reduce P(sustained stress) to approximately 15-18%. P(rating action | sustained stress) remains ~30-35% per the Stress Scanner framework. P(rating action | no sustained stress) drops to ~3% given FS improvement removes the independent delinquency pathway. Revised unconditional: 0.165*0.32 + 0.835*0.03 = 0.053 + 0.025 = 0.078. Adjusting upward to ~11% for three-agency coverage, full-year horizon, and residual South America softness (-5% industry volume). The sustained stress scenario that would trigger a rating action is materially less likely than 7 days ago.

The prior prediction anchored on four stress vectors: tariffs ($2.4B), FTC lawsuit, large FS portfolio ($64.7B), and CFO transition. Q1 materially mitigates three of them. CFO transition orderly (governance risk mitigated). FS portfolio improving (favorable spreads, lower provisions — the $160-295M cost feedback loop from a downgrade becomes less relevant when agencies see strengthening credit quality). The tariff and FTC risks remain, but the cash flow guidance raise to $4.5-5.5B provides substantial cushion even under tariff escalation scenarios. The 2016 analog debate becomes less contentious: Deere is tracking above plan, not below it. At $4.5B+ NI floor, agencies have no data-supported basis for negative outlook. Residual probability (~10%) reflects FY2026 having 10+ months of uncertainty remaining and South America softness.

The prior prediction's highest risk pathway was: NI below $4.0B guidance floor AND FS delinquency spike compounding simultaneously. Q1 severs the FS delinquency component (credit quality improving, provisions lower). The NI floor itself has moved to $4.5B, requiring a larger adverse shock to breach. The perfect storm tail risk explicitly reduced from 8-15% to 3-8%, and that scenario was the primary driver of rating action probability. Remaining upside risk: South America softness could persist or deepen, C&F order bank strength hasn't yet translated to earnings, and FTC litigation remains unresolved. These residual risks, combined with the broad resolution criteria (3 agencies, negative outlook counts, full year), support ~12% vs ~17% prior.

Rating agencies require a forward-looking deterioration case to act. Q1 FY2026 provides the opposite: NI guidance raised to $4.5-5.0B, cash flow raised to $4.5-5.5B, FS credit quality improving. Agencies watching Deere now see a company executing ahead of plan in a cyclical trough, with buybacks resumed — a signal of management confidence and financial flexibility. The structural concern about FS provision coverage (68% vs benchmark) loses urgency when actual delinquency trends are improving. Blue-chip industrials executing in this manner are rarely placed on negative outlook. The remaining 9% probability reflects: (1) the full year still has 10 months remaining, (2) tariff risk and South America softness persist, (3) S&P and Moody's have their own independent assessment timelines.

Q1 data is materially positive for the credit profile, but the question runs through December 31, 2026. A single quarter does not resolve the full-year risk. The C&F order bank up 50% is encouraging but C&F margins remain compressed and the order book has not yet converted to earnings. South America industry volumes -5% adds a headwind that was not present in the prior analysis. The FTC lawsuit remains an unresolved tail risk — agencies will carry a qualitative flag for this regardless of earnings trajectory. Tariff escalation (15-25% probability per prior analysis) could still compress margins. The $64.7B FS portfolio still creates amplification sensitivity even as credit quality improves. Given these residual factors, 13% reflects meaningful reduction from 17% while not fully discounting the 10-month remaining exposure window.

The prior prediction assigned LOW confidence to the 0.21 run due to data staleness — that concern is now resolved with Q1 earnings. The stale-data uncertainty that inflated the prior sonnet range (0.14-0.21) is removed. Freshly updated data shows: NI guidance raised, cash flow raised, FS improving, buybacks resumed. The data staleness uplift should be reversed. The Stress Scanner's STRETCHED assessment still applies but at a less stressed level. The FS provision coverage debate (68% ratio) becomes less material when actual provisions are moving lower. Residual risk: tariff escalation, agricultural commodity prices, and the structural FS amplification mechanism all remain active. 10% reflects this residual exposure without the staleness discount.

Deere raised NI guidance to $4.5-5.0B and cash flow guidance to $4.5-5.5B. Rating agencies do not place investment-grade industrials on negative outlook when earnings guidance is moving up, not down. The FS portfolio is showing improving credit quality. Buybacks resumed. The cyclical trough case for a rating action is becoming structurally harder to make with each data point. Remaining risk is the full calendar year — something unexpected (tariff escalation, commodity price collapse) could still change the picture.

The $64.7B FS portfolio still creates ratings sensitivity even with improving credit quality — absolute portfolio size means agencies watch closely. South America softness adds a headwind. Three agencies with independent review cycles means one could act even if the other two are comfortable. The prior probability was 17%; Q1 developments are broadly positive but not conclusive for a full-year outcome. Reducing to 12% reflects improved fundamentals while acknowledging remaining structural exposure from the large FS book and ongoing macro risks.

Q1 execution ahead of plan, guidance raised, FS improving, buybacks resumed. These four data points collectively address the primary triggers for a rating action. The CFO transition risk is mitigated. The remaining risks (FTC, tariffs, South America) are real but do not individually push probability above 15% even in prior analysis. Combined at lower stress levels, 10% is a reasonable estimate. The 2016 analog that rating agencies would use as a through-cycle benchmark is now more defensible, not less, given Deere is tracking above plan.