Deere, Caterpillar and Honeywell all sit at the centre of the capex recovery story. Each offers a different exposure. Here is how to rank them.
The industrial capex recovery that has been telegraphed since mid-2024 is finally showing up in the order data. Deere's precision agriculture platform, Caterpillar's mining and construction exposure, and Honeywell's aerospace and automation portfolio all have distinct angles on the cycle. Taken together they cover the three largest capex verticals that matter for 2026 and 2027.
The three names trade at roughly comparable multiples. The differentiation comes from which cycle is earlier in its recovery, which management team has been most disciplined with capital, and which has the longest runway of backlog visibility. On those dimensions, Deere wins, Caterpillar is close behind, and Honeywell lags despite the most interesting breakup dynamic.
Deere sits at the intersection of agriculture equipment demand and the precision-agriculture software transition. The traditional Deere cycle follows farmer income, which follows commodity prices. The new Deere cycle is layered on top of that with a recurring software revenue profile from See and Spray, precision planting, and autonomous tractor deployments.
The agriculture cycle has been in a soft patch through 2024 and 2025 as row crop prices compressed. Order book indicators suggest the trough has passed. Dealer inventory is lean relative to prior cycles.
The precision ag platform delivers roughly $2 billion of recurring revenue, growing at a mid-teens rate. That is the part of the business that deserves a software multiple rather than an industrial multiple, and the market has not fully re-rated on that mix shift. A five-point multiple expansion on precision ag alone is worth $15 per share.
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Caterpillar covers the heavy construction, mining, and energy equipment markets. The 2025 results were strong, driven by data centre and infrastructure-related demand. The mining capex cycle has been the laggard, but the commentary suggests it is inflecting.
The services business contributes roughly 30% of the total revenue at structurally higher margins than the equipment business. Service revenue has been compounding at 8% regardless of the equipment cycle. That is the backbone of the investment case.
Caterpillar's capital allocation has been exemplary. The buyback programme has retired 3% of shares outstanding annually for five consecutive years. The dividend has been raised 32 consecutive years. The stock at $395 trades at 17x forward earnings, fair for the quality but not cheap.
Honeywell sits across aerospace, automation, and performance materials. The conglomerate structure has been under activist pressure, and the 2025 announcement of a three-way breakup accelerates the value-unlock potential.
The aerospace segment is the jewel. Demand is strong, backlog is at record levels, and the margin profile is among the best in industrials. The automation segment is the question mark. Performance materials is the steady cash generator.
The breakup should crystallise roughly $40 per share of value over the next 18 months based on peer multiples. That is meaningful but it requires execution of a multi-year process.
Deere wins on the combination of cycle timing and mix shift optionality. The agriculture cycle is inflecting earlier than most investors realise, and the precision ag re-rating is a free option on top of the cyclical recovery.
Caterpillar is the safer holding. The mining capex is a 2026-2027 driver, and the quality of the business deserves the premium multiple.
Honeywell is the breakup trade. The catalyst is clear but the timeline is longer, and the market is already pricing a meaningful portion of the sum-of-the-parts value.
For a single-name industrial exposure, Deere at $480 against fair value of $560 offers the best risk-reward. Caterpillar is the secondary position. Honeywell is the patient option for investors willing to hold through the breakup cycle.
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Deere finished fiscal 2025 with revenue down 12 percent year-over-year and net income compressed to $5.0 billion. The cycle has turned. The longer-term story is the precision agriculture platform, which now produces recurring software-like revenue and is changing the franchise's earnings durability. The Research Desk goes deep.
Wall Street is asking whether Caterpillar can sustain mid-cycle margins through the current tariff regime. The Risk Desk view: the tariff hit on consolidated EBIT is approximately 200-300 basis points and is not the binding constraint. The cycle is.
Caterpillar generated $10.3 billion of free cash flow in 2025, and revenue held above $67 billion despite construction softness. Three previous mid-cycle plateaus tell us how this one likely resolves.