AGCO Stock Falls After Earnings. Crop Prices Are Down.

Coming into Friday trading, AGCO stock was up 14% this year and up 6% over the past 12 months. (PAUL BOTES/AFP via Getty Images)

Key Points

• AGCO reported third-quarter adjusted earnings per share of $1.35 on sales of $2.5 billion, exceeding Wall Street expectations.
• Full-year earnings per share guidance increased to $5, implying fourth-quarter earnings per share of approximately $1.89.
• AGCO’s third-quarter sales decreased from $2.6 billion a year ago, impacted by lower agricultural commodity prices.

Farming has been a tough business for AGCO and its peers for a couple of years. Things appear to be stabilizing.

On Friday, AGCO reported third-quarter adjusted earnings per share of $1.35 from sales of $2.5 billion. Wall Street was looking for $1.22 and $2.5 billion.

Full-year earnings guidance was increased to $5 from a prior range of $4.75 to $5. Guidance implies fourth-quarter earnings of about $1.89. Wall Street is projecting $1.81.

The stock was up more than 5% in premarket trading, but slid to $103.16, down 2.8% on the day. The S&P 500 and Dow Jones Industrial Average gained 0.3% and 0.1%, respectively.

Barid analyst Mig Dobre noted that margins were a little better than expected, but a portion of the earnings “beat” was because of a lower tax rate.

A year ago, AGCO reported earnings per share of 68 cents from sales of $2.6 billion. Third-quarter sales fell with farmer incomes squeezed by cost inflation amid lower prices for agricultural commodities. Benchmark corn prices have averaged roughly $4.50 per bushel for the past 12 months, down from closer to $5.50 the prior 12 months.

Corn prices hit about $8 per bushel in 2022, when AGCO generated almost $13 billion in sales. Wall Street expects sales of just under $10 billion for 2025.

AGCO stock traded at nearly $150 a share in early 2022. Coming into Friday trading, shares were at $106.12, up 6% over the past 12 months.

“We’re at the bottom of the [agricultural] cycle,” CEO Eric Hansotia tells Barron’s. His company’s North American production fell 50% year over year, faster than the 30% decline in retail sales. That helps reduce inventory and improve the setup for when farmers can buy more equipment again.

Bottoming cycles are good news for investors. AGCO sales are expected to grow in 2026 for the first time since 2023. Growth would be a good sign that the farm business is getting better.

Still, “it’s tough sledding,” added Hansotia. Farmer “costs have been up…and uncertainty high.”

A trade deal between the U.S. and China can help reduce uncertainty and boost prices. Ultimately, higher crop prices for a sustained period are what’s needed to boost farm incomes and farmers’ confidence, too.

Write to Al Root at allen.root@dowjones.com