Reasons Why You Should Retain AGCO Corp Stock in Your Portfolio Now

AGCO Corporation AGCO benefits from strong demand for its Precision Agriculture Business, 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 the company’s margins.

What is Aiding AGCO’s Stock?

Improved Projection for Farm Income: The U.S. Department of Agriculture (USDA) projects a net farm income of $180.1 billion for 2025, indicating an increase of 29.5% from that reported in 2024. This marks an improvement from the decline in farm income witnessed in the past two years. The rise factors in a $33.1-billion year-over-year increase in direct Government farm payments 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, seeing a compound annual growth rate (CAGR) of 6.3%.

Focus on Portfolio Optimization: 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 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.

Solid Demand for Precision Agriculture Business: The company has been experiencing strong demand for its Precision Agriculture Business, 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 benefits 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. The company expects to negate tariff impacts with planned mitigation actions.

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 in order to drive margins and strengthen product offerings. 

These improvements will support AGCO’s investments in Precision Agriculture and digital initiatives, driving higher sales growth and margin. The company is expanding its capability by increasing engineering expenses while investing in acquisitions.

Near-Term Concerns for AGCO Corp

AGCO has been facing challenges due to weak farmer spending amid low commodity prices. This has weighed on its earnings performance. Even though net farm income is expected to grow in 2025, USDA projects a decline of 2.3% in total crop receipts in 2025 due to lower receipts for corn and soybeans. Lower prices due to an increase in supply were expected to negate gains from higher sales volumes. 

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 was challenging in the first quarter of 2025 as well. AGCO's key markets experienced decreased retail sales of farm equipment in 2024, and continued to be challenging in the first quarter of 2025. This is likely to persist throughout 2025. 

In Western Europe, industry retail sales declined in 2023 and 2024. Western Europe industry retail tractor sales declined year over year in the first quarter of 2025. Increased interest rates and overall economic conditions hampered the demand. If it persists, lower industry sales will put a dent in the company’s top line in 2025.

AGCO Stock’s Price Performance

AGCO Corp’s shares have gained 0.8% in the past year compared with the industry’s growth of 30.7%.

AGCO Corp’s Zacks Rank & Stocks to Consider

AGCO currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the Industrial Products sector are Life360, Inc. LIF and Federal Signal Corporation FSS. LIF sports a Zacks Rank #1 (Strong Buy), and FSS has a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.

Life360 delivered an average trailing four-quarter earnings surprise of 415%. The Zacks Consensus Estimate for LIF’s 2025 earnings is pinned at 24 cents per share, which indicates a year-over-year upsurge of 500%. Life360’s shares have skyrocketed 99.1% in a year.

Federal Signal delivered an average trailing four-quarter earnings surprise of 6.4%. The Zacks Consensus Estimate for FSS’ 2025 earnings is pinned at $3.83 per share, which indicates year-over-year growth of 14.6%. The company’s shares have gained 20% in a year.

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

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