What Management Said
Read the full Q2 2026 transcript ↗Welcome to those of you joining us for AGCO's second quarter 2026 earnings call. We'll also discuss demand, product development, and capital expenditure plans, and timing of those plans, and our expectations concerning the costs and benefits of those plans and timing of those benefits. We'll also cover future revenue, crop production, farm income, production levels, price levels, margins, earnings, operating income, cash flow, engineering expense, tax rates, and other financial metrics. This is reflected in our adjusted earnings per share of $1.43, an increase of $0.08 over the prior year.
Operating income was $140.7 million for the quarter, a decrease of 14% year-over-year, with reported operating margins decreasing by 80 basis points to 5.4%. On an adjusted basis, operating margin decreased 170 basis points to 6.6%, driven primarily by lower sales and production volumes and higher input costs, including tariffs. This environment is increasing demand for solutions that help manage costs, improve efficiency, and protect yields. Across many markets, demand remained measured, reflecting affordability considerations, elevated input costs, and a focus on near-term revenue returns.
In North America, industry demand remains soft year-over-year, with continued weakness in higher horsepower equipment as farmers defer larger capital purchases. We're also seeing softer demand in lower horsepower segments, reflecting rural lifestyle customers focused on affordability in the current environment. In Western Europe, industry conditions were mixed as input costs, demand, and capital allocation considerations influenced equipment purchases. Tractor demand showed relative stability year-to-date compared to prior year levels, but weakened during the second quarter.
What went well
- Adjusted EPS of $1.43, up $0.08 versus prior year despite soft demand
- North America net sales up ~20% (constant currency) led by high-horsepower tractors and Hay tools
- Market share gains in key regions, especially high-horsepower with Fendt and Massey Ferguson
- North America pricing exceptionally strong at ~3.5%, driving company pricing over 2% in the quarter
- Dealer inventory reduced in all three major regions (Europe ~3.5 months, LatAm ~3.5 months, NA just below 7 months)
- Fendt 800 series set a new class fuel-efficiency record in the DLG PowerMix test; 50,000th Fendt 900 Vario celebrated
- $22M IEEPA tariff refunds recognized; ~$345M of shares repurchased in the quarter
What went wrong
- Net sales ~$2.6B, down 1% YoY (down 4% constant currency); Europe and LatAm below expectations
- Adjusted operating margin fell 170 bps to 6.6%; operating income down 14% to $140.7M
- Latin America net sales down 25% (constant currency) with operating income ~$49M lower YoY
- Europe/Middle East net sales down ~5% (constant currency); Germany market ~15% weaker than expected
- Year-to-date free cash flow use of ~$347M vs. positive $63M in first half 2025
- Full-year guidance cut on sales, EPS, and margin amid higher tariffs and weaker demand
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Full-year net sales | FY2026 | $10.1B-$10.2B |
| Adjusted EPS | FY2026 | $5.50-$5.75 |
| Adjusted operating margin | FY2026 | ~7.5% |
| Pricing realization | FY2026 | 2%-2.5% |
| Currency translation | FY2026 | +2% |
| N. America large ag industry | FY2026 | ~down 15% |
| N. America small ag industry | FY2026 | down 0%-5% |
| Western Europe industry | FY2026 | ~flat |
| Brazil industry | FY2026 | 5%-10% lower |
| Net tariff impact | FY2026 | $95M net ($115M gross less $22M refund) |
| Capital expenditures | FY2026 | $300M-$325M |
| Q3 net sales | Q3 2026 | $2.3B-$2.4B |
| Q3 EPS | Q3 2026 | $0.85-$0.90 |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Net sales | -1% reported (-4% constant currency) | Weaker demand in Europe and Latin America partly offset by strong North America |
| Adjusted operating margin | -170 bps to 6.6% | Lower sales/production volumes and higher input costs including tariffs, partly offset by pricing and IEEPA refunds |
| Operating income | -14% to $140.7M | Lower volumes and absorption, mainly Latin America |
| North America net sales | +~20% constant currency | Stronger high-horsepower tractor and Hay tool volumes plus market share gains |
| Latin America net sales | -25% constant currency | Challenged industry demand across all major product categories; pricing roughly flat |
| Europe/Middle East net sales | -~5% constant currency | Restrained markets, notably France weak; Germany/UK partly offset |
| Asia-Pacific-Africa net sales | -~6% ex-currency | Higher Australia sales offset by weaker Asian and African markets |
| Replacement parts sales | +3% reported (~flat ex-currency) | Farmers prioritizing maintenance of existing fleets in disciplined spending environment |
| Free cash flow (YTD) | -$347M use vs +$63M prior | Higher first-half production drove greater inventory and working capital investment |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Production alignment | YTD production hours up ~6% | Full-year production now expected slightly lower vs 2025 with second-half cuts in LatAm and W. Europe | — |
| Farmer economics | input cost pressure | Double-digit fuel/fertilizer increases (tied to Strait of Hormuz); farmers cautious, applying less fertilizer | — |
| Tariffs | $45M prior year | $95M net FY2026 (+$50M YoY), $115M gross less $22M IEEPA refund | — |
| Precision Ag / PTx | $860M in 2025 | Flat to modestly up expected; retrofit channel resilient, SymphonyVision spraying +35% and sold out | — |
| Mid-cycle margin target | 14%-15% mid-cycle | Unchanged; operating at ~85% of mid-cycle demand | — |
| Brazil stimulus | no farmer access to special program | Subsidized loan / FINAME program activated late last week, a catalyst for second half plus election-year incentives | — |
| Demand drivers for 2027 | aging fleet | E15 year-round, renewable diesel/SAF, Brazil ethanol (27%->35%), Super El Nino potential support optimism | — |
Q&A Summary
What drove North America upside beyond share gains — pricing, PTx attachment, or mix?
Share gains had strong momentum in high-horsepower (Fendt and Massey Ferguson with Hay); North America pricing was exceptionally strong at ~3.5%, helping company pricing exceed 2%. FarmerCore on-farm service (65% coverage in NA) supports the momentum.
Any progress on combine market share, and share gains in other regions?
Combines are a small business with no meaningful movement yet this early season; Europe was a mixed bag (gained in Germany, lost a bit in France) and South America saw a modest gain, helped by launching Fendt in Argentina. Combine share expected to grow given high net promoter scores and dealer conversions.
How is AGCO preparing for demand over the next 6-12 months if input costs stay high, and is a weak first-half 2027 possible?
Running multiple scenarios; has cut production heavily (South America underproduced ~30 hours, down ~30% YoY) to right-size dealer inventory. Even a flat industry next year means higher production and fewer discounts. Retail demand generators (E15, renewable fuels, Brazil ethanol) could lift grain prices and farmer economics.
What is the exit-year underproduction rate versus retail demand in North and South America?
South America roughly 15% below retail; North America somewhat less, noting NA-made products (track tractors, sprayers, planters, Gleaner combine) are produced at low levels while tractor share gains come from European-imported products.
What caused the Q2 miss in Europe/EAME, and how should back-half margins be viewed?
Two drivers: Germany was ~15% softer than expected (a big market with dominant AGCO share) and dealer inventories fell to ~3.5 from ~4 months, a ~$200M sell-in vs sell-out swing. Europe margins (15% in Q2) drop to ~11%-12% in Q3 on summer shutdown/production cuts, then recover to high teens in Q4.
What bridges Q3 to a stronger Q4 besides production?
Revenue growth — Europe revenue around $1.3B-$1.4B in Q3 rising north of $2B in Q4 as production ramps out of summer shutdown, plus more new model-year pricing hitting in Q4.
What is order velocity in Europe now, given commodity/fertilizer price improvement?
August holiday slows order flow; order board around three months, down slightly from three-to-four last quarter. Management is more optimistic orders tick up in September and into Q4.
Was strong North America large ag sell-in or sell-through, and how does high-horsepower mix affect second-half margins?
Mainly sell-through — dealer units fell ~6% sequentially while share grew at the retail level. High-horsepower tractors carry relatively good mix; Q3 margins improve sequentially and YoY, then dip slightly in Q4 absent new U.S. subsidy triggers.
What drives the implied second-half improvement in Brazil, and how reliant is it on government stimulus?
Subsidized financing is key — the special ~BRL 10 billion program (rate just over 9%) became accessible late last week after a delayed release, plus ~1% lower FINAME rates and election-year incentives are expected to spur back-half demand.
Can AGCO be price-cost neutral this year, and what are the 2027 margin building blocks?
Excluding tariffs, price of 2%-2.5% is price-cost positive, but including the ~$50M tariff headwind it turns negative absent further IEEPA rebates. For 2027, carryover of $60M-$70M restructuring savings and producing closer to retail are positives, though heavily dependent on industry conditions.
More on Agco Corp /De
Reported 2026-07-30 · figures from the Agco Corp /De Q2 2026 earnings call.
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