AGCO Corporation

Second quarter net sales were approximately $2.6 billion, down 1% year over year; on a constant-currency basis, net sales were 4% lower. Adjusted EPS was $1.43, up $0.08 from the prior year. Reported operating income was $140.7 million, down 14% year over year; reported operating margin was 5.4%, down 80 basis points, and adjusted operating margin was 6.6%, down 170 basis points. For the first half, net sales were up approximately 6% reported and essentially flat excluding currency. Free cash flow use in the first half was approximately $347 million versus positive free cash flow of $63 million a year ago. AGCO now expects full-year 2026 net sales of $10.1 billion to $10.2 billion, adjusted EPS of $5.50 to $5.75, adjusted operating margin of about 7.5%, capital expenditures of $300 million to $325 million, and free cash flow conversion of 75% to 100% of adjusted net income. For Q3, it targets net sales of $2.3 billion to $2.4 billion and EPS of $0.85 to $0.90. Full-year production hours are now expected to be slightly lower than 2025. Management now expects gross tariff-related costs of about $115 million in 2026, with $22 million of IEEPA tariff refunds recognized in Q2 reducing the net tariff impact to $95 million for the year.

Eric Hansotia framed the quarter as evidence that AGCO is staying disciplined through a difficult demand backdrop, with production being aligned to retail demand, dealer inventories being managed tightly, and costs and working capital being controlled. He emphasized that the company’s Farmer-First strategy is showing up in tangible ways through Fendt share gains, precision ag expansion, autonomy launches, and AI deployment across product development and operations. His tone was cautious on near-term farm economics, but constructive on the long-term outlook for agriculture and AGCO’s ability to outperform through the cycle.

Damon Audia walked through the regional and company financials, highlighting North America’s strong sales growth, Europe’s weaker-than-expected demand, and Latin America’s continued pressure. He noted that pricing remained solid, including about 3.5% pricing in North America, while tariffs were a meaningful headwind; gross tariff-related costs are expected to be about $115 million in 2026, with net tariff impact of $95 million after the $22 million IEEPA refund in Q2. He also pointed to first-half free cash flow use of $347 million, explained by higher production and inventory investment, and reiterated capital allocation priorities: invest in the business, maintain investment grade balance sheet, pursue targeted tech acquisitions, and return excess capital via share repurchases and dividends.

Analysts focused on the strength of North America share gains, the cause of Europe’s Q2 miss, the outlook for Brazil, and how production will be managed if demand stays weak. Management said North America gains were driven by high-horsepower tractors, Fendt and Massey Ferguson momentum, and FarmerCore adoption, while Europe was hurt by a much softer German market and faster-than-expected dealer inventory reduction. On Brazil, management said second-half demand should improve as subsidized financing becomes available and as election-year incentives may support the market; on production, they described active scenario planning and said they are underproducing in South America by around 30% year over year, with underproduction relative to retail in South America around 15%.