AGCO Gains From Precision Ag Business Demand & Cost Control Efforts

AGCO Corporation AGCO benefits from strong demand for its Precision Agriculture Business, a technology-rich Fendt full lineup of equipment and replacement parts. The company's focus on innovation and automation will drive growth in the upcoming quarters. Moreover, improved net farm income will boost its margins.

However, AGCO is facing lower industry retail sales in North America and Western Europe. Material cost inflation and higher engineering expenses are other woes.

Factors Aiding AGCO Corp Stock

Improved Projection for Farm Income: The U.S. Department of Agriculture projects a net farm income of $180.1 billion for 2025, indicating an increase of 29.5% from 2024. This marks an improvement from the decline in farm income witnessed in the past two years. The increase reflects a $33.1 billion year-over-year rise in direct government farm payments, bringing the total to $42.4 billion.

Despite the ongoing volatility in commodity prices and lower crop receipts, agricultural equipment demand will continue to be supported by increased global demand for food, stemming from population growth and an increasing proportion of the population aspiring for better living standards. In the United States, the agricultural machinery market was forecast to reach $42.05 billion in 2025 and grow to $57.08 billion in 2030, witnessing a compound annual growth rate of 6.3%.

Solid Precision Ag Business Demand & Cost Control Actions: The company has been experiencing strong demand for its Precision Agriculture Business, a technology-rich Fendt full lineup of equipment and replacement parts. This is expected to persist in the upcoming quarters. AGCO will further benefit from growth in the Precision Planting business and the Fuse suite of products as farmers see the benefit of these high-tech solutions.

The company expects to deliver precision agriculture net sales of $2 billion by 2029 and outgrow the industry by 4-5% annually. It expects a 14-15% adjusted operating margin at mid-cycle by 2029. AGCO expects to negate tariff impacts with planned mitigation actions. It plans to mitigate lower sales volumes with cost controls and stable engineering expenses.

Portfolio Optimization Efforts: AGCO is focusing on strategic transformation. It intends to streamline and focus its portfolio of agricultural machinery and precision ag technology solutions. In line with this, on April 1, 2024, the company formed a joint venture with Trimble TRMB to form PTx Trimble. PTx Trimble is now a new company with an 85% stake in AGCO and a 15% stake in Trimble. This move facilitates AGCO’s rapid growth in technology transformation and provides seamlessly compatible, powerfully simple precision ag solutions.

On Nov. 1, 2024, the company announced that it had closed its previously announced deal to sell the majority of its Grain & Protein business to American Industrial Partners. The sale was priced at $700 million. AGCO intends to use the net proceeds from the transaction per its capital allocation goals, which include debt repayment, disciplined investment in technology and organic growth initiatives, and capital return to shareholders.

Near-Term Concerns for AGCO Stock

In North America, industry retail sales in 2024 were down from the previous year. The decline was due to lower sales of smaller equipment. This remained challenged in the first half of 2025 as well. In Western Europe, industry retail sales declined in 2023 after peaking in 2022. The same has also moved down in 2024.

In the Western European industry, retail tractor sales declined year over year in the first two quarters of 2025, which caused the company to reduce its industry retail outlook for North America and Europe for 2025. Increased interest rates and overall economic conditions hampered the demand. If it persists, lower industry sales will put a dent in AGCO’s top line in 2025.

AGCO increased net sales to $9.8 billion for 2025 from the prior stated $9.6 billion. However, the figure still indicates a decline of 15.5% from the 2024 reported figure. The company expects adjusted earnings per share for 2025 to be $4.75-$5.00, indicating a decline of 35% at the mid-point from the 2024 reported figure.

AGCO Corp Stock’s Price Performance

AGCO Corp’s shares have gained 29.1% in the past year compared with the industry’s growth of 30.7%.

AGCO’s Zacks Rank & Other Stocks to Consider

AGCO currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Some other top-ranked stocks from the Industrial Products sector are Life360, Inc. LIF and Federal Signal Corporation FSS, each carrying a Zacks Rank #2 (Buy) at present.

Life360 delivered an average trailing four-quarter earnings surprise of 487%. The Zacks Consensus Estimate for LIF’s 2025 earnings is pinned at 29 cents per share, which indicates a year-over-year upsurge of 583%. Life360’s shares have skyrocketed 117.7% in a year.

Federal Signal delivered an average trailing four-quarter earnings surprise of 5.7%. The Zacks Consensus Estimate for FSS’ 2025 earnings is pinned at $3.99 per share, which indicates year-over-year growth of 19.6%. Federal Signal’s shares have gained 37.1% in a year.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research