DE or AGCO: Which Farm Equipment Stock Offers Better Upside Now?

Deere & Company DE and AGCO Corporation AGCO are two well-known names in the agricultural machinery industry. Both companies produce a wide range of farm equipment, from tractors, combines and sprayers, and have been steadily investing in advanced technologies such as precision agriculture and smart farming solutions. While Deere commands greater global brand recognition and scale, AGCO has been steadily strengthening its presence in Europe and South America.

Their positions in the industry make them key beneficiaries of long-term trends, including rising food demand, the adoption of sustainable farming practices and the integration of automation in agriculture. However, farmer sentiment has weakened recently, pressured by softer commodity prices, higher input costs and elevated interest rates, all of which have weighed on demand for agricultural machinery.

Amid this backdrop, to determine which stock may be the better investment at this time, it’s important to examine the fundamentals, growth opportunities, and potential risks facing Deere and AGCO.

The Case for Deere

Deere, known for its iconic green tractors, has a market capitalization of $127 billion. It specializes in agricultural, forestry and turf equipment, and has a strong presence in precision farming technology and construction equipment. 

DE has witnessed revenues declining for eight consecutive quarters and earnings slipping in the last seven, due to lower volumes in both the agriculture and construction businesses. 

Deere anticipates this to persist in fiscal 2025, particularly in the large agriculture equipment market in the United States and Canada, which is expected to decline 30%. The small agriculture and turf equipment market in the United States and Canada is projected to decline 10%. European agricultural markets are expected to be flat or decline approximately 5%, while South American agricultural markets are forecast to remain flat. The Asia market is expected to be flat to increase 5%. 

DE anticipates net sales for Production and Precision Agriculture to decline 15-20% year over year in fiscal 2025. Sales of Small Agriculture and Turf are expected to drop 10% and Construction and Forestry sales are projected to move down 10-15%.

Deere currently expects net income between $4.75 billion and $5.25 billion for fiscal 2025. The company has lowered its guidance twice this fiscal year. The projected range is way lower than the $7.1 billion reported in fiscal 2024. Deere also estimates the pretax impact of tariffs for fiscal 2025 to be around $600 million.

The company has been managing production levels and cutting costs to maintain margins amid the overall weakness in the industry. Over the long term, Deere is well-positioned for growth, underpinned by consistent investments in innovation and geographic expansion. The company remains focused on revolutionizing agriculture with technology, aiming to make farming more automated, user-friendly and precise across the entire production process. 

Focusing on launching products with advanced technologies and features provides it a competitive edge. The company recently acquired GUSS Automation, LLC, a pioneer in autonomous sprayers used in orchards and vineyards.

The Case for AGCO

AGCO Corp., with a market capitalization of approximately $8.2 billion, is a manufacturer and provider of agricultural machinery and precision agriculture technology. The company’s brand portfolio includes leading brands like Fendt, Massey Ferguson, PTx and Valtra. 

Like Deere, AGCO’s revenues and earnings have been declining for seven consecutive quarters. The company raised its net sales guidance to $9.8 billion for 2025 from the prior stated $9.6 billion, but the figure indicates a year-over-year decline of 15.5%. Adjusted earnings per share for 2025 are expected at $4.75-$5.00, indicating a decline of 35% at the mid point.

In North America, AGCO expects sales volumes of large agricultural equipment to be down 25-30% and small agricultural equipment to be down 5%. In Western Europe, sales will be down 5-10%, and Brazil sales will be flat to up 5%.  

AGCO has been making aggressive production cuts, implementing cost control and restructuring actions. The company closed the sale of the majority of its Grain & Protein business to focus on core agricultural equipment. 

AGCO continues to invest in products, premium technology and sustainable smart farming solutions to improve distribution, enhance digital capabilities, expand product lines and improve factory productivity to drive margins and strengthen product offerings. 

Last year, it completed the largest agricultural technology deal in history to create the PTx Trimble joint venture, which was merged with its Precision Planting business to form PTx. It boasts an industry-leading portfolio of mixed fleet, precision agricultural technologies and solutions, boosting its competitive edge and long-term prospects.

How do Estimates Compare for DE & AGCO?

The Zacks Consensus Estimate for Deere’s fiscal 2025 earnings is $18.58 per share, indicating a year-over-year fall of 27.6%. The 2026 estimate implies growth of 12.03%. Both estimates have moved down over the past 60 days. 

The Zacks Consensus Estimate for AGCO’s 2025 earnings is $4.77 per share, indicating a year-over-year decline of 36.4%. The estimate for 2026 implies a rise of 37%. EPS estimates for both 2025 and 2026 have been trending up over the past 60 days.

DE & AGCO: Price Performance & Valuation Comparisons

Year to date, DE stock has gained 10.8%, outperforming the Zacks manufacturing - farm equipment industry’s 9.5% growth. AGCO has outperformed both with a year-to-date gain of 17.4%. 

DE vs AGCO & Industry’s YTD Performance

Deere is currently trading at a forward 12-month earnings multiple of 22.84X. AGCO stock is currently trading lower, at a forward 12-month earnings multiple of 18.20X. AGCO is also trading at a discount to the industry average of 20.96X.

DE vs AGCO & Industry’s Valuation

DE or AGCO: Which Stock Deserves a Spot in Your Portfolio?

Both Deere and AGCO Corp. are grappling with subdued farmer sentiment, which has reflected on their results. For Deere, weakness in its construction equipment segment has further exacerbated the pressure. Despite these headwinds, AGCO has outpaced Deere in terms of year-to-date price performance. The positive revision activity in earnings also signals growing analyst confidence. 

From a valuation standpoint, AGCO is more attractive currently, trading at a lower multiple and a Value Score of B compared with DE’s Value score of D. AGCO currently sports a Zacks Rank #1 (Strong Buy) while Deere carries a Zacks Rank #4 (Sell). AGCO stands out as the more attractive pick for investors seeking exposure to the agricultural equipment space at this time.

You can see the complete list of today’s Zacks #1 Rank stocks here. 

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

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