The leading farm equipment manufacturer beat earnings estimates but missed on revenue.
AGCO (NYSE:AGCO), a leading manufacturer of tractors and farm equipment, saw its stock price drop nearly 4% in early trading after the company reported mixed fourth quarter results.
The Duluth, Georgia-based company saw a 24% drop in net sales in the quarter to $2.9 billion. That fell well short of the $3.2 billion that analysts had estimated.
The firm had a net loss of $256 million in the quarter, of -$3.42 per share, which was down significantly from $339 million in net income in Q4 of 2023. In an adjusted basis, excluding impairment charges and restructuring and business optimization expenses, net income was $1.97 per share. That was about 47% off the $3.78 per share in the fourth quarter of 2023. But it beat analysts’ estimates of $1.86 per share.
For the full year, net sales were $11.7 billion, a year-over-year decrease of 19.1%. Also, the firm had a net loss was $5.69 per share, which includes the loss on sale of the Grain & Protein business, impairment charges, and restructuring and business optimization expenses. This was down from $15.63 the previous year. Adjusted net income was $7.50 per share for fiscal 2024, down from adjusted net income of $15.55 per share in 2023.
Also, AGCO management commented on the new tariffs imposed on U.S. trade partners, and the retaliatory tariffs.
Tractor sales plummet in difficult market
AGCO’s two main products are tractors and combines, which are machines designed to harvest seeds and grains.
The industry, in general, had a difficult year in 2024, for a variety of reasons, including inflated prices and costs, a reduction in the number of farms, and a drop in net farm income.
That resulted in a 13% decline in tractor sales in North America for AGCO last year, with sales declines relatively consistent across the horsepower categories. Combine unit sales were down 22% in 2024 compared to 2023.
In Brazil tractor sales decreased 4% during 2024 while combine sales fell 33%. AGCO cited lower commodity prices, rising farmer debt, and reduced demand from China created as the main factors.
Further, in Western Europe, tractor sales fell 6% in 2024 with more significant declines in Scandinavia, the United Kingdom and Italy.
Europe and the Middle East (EME) is AGCO’s largest market, with $6.8 billion in net sales in 2024, down 10%. In North America, net sales declined 24% year over year to $2.8 billion, while South America saw net sales decline 41% to $1.3 billion. Asia Pacific and Africa saw sales tank 23% to $683 million.
CEO Eric Hansotia said AGCO’s full year adjusted operating margin performance of 8.9% in 2024 was “by far our best performance in an industry downturn.”
More tough times ahead in 2025
Looking ahead, 2025 is going to be another difficult year, and the outlook is clouded by the prospect of more tariffs.
AGCO anticipates net sales of $9.6 billion in 2025, which would be 18% lower than 2024. The projection is based on expectations of lower sales volumes, relatively flat pricing, and unfavorable foreign currency translation in what is expected to be another challenging year for farmers.
Adjusted operating margins are targeted to come between 7% and 7.5% based on lower sales, lower production volumes, increased cost controls, and moderately lower investments in engineering. That would be down from 8.9% in 2024. Additionally, adjusted EPS is targeted at approximately $4.00 to $4.50, down from $7.50 in 2024.
“In 2025, we will continue to execute our Farmer-First strategy strengthened by the portfolio moves and aggressive cost control actions, including our ongoing restructuring program,” Hansotia said. “We expect these efforts to dampen the impact of further weakening industry demand, helping deliver adjusted operating margins well above levels achieved during prior industry troughs.”
Tariffs cloud outlook
Clouding things further are tariffs. The U.S. imposed a 10% additional tariff on imports from China this week. Further, 25% tariffs on Canada and Mexico were paused for 30 days, so uncertainty remains there, too. And there could be more tariffs elsewhere.
China hit back with retaliatory tariffs on some U.S. products, including farm equipment. Specifically, China will impose an additional 15% tariff on coal and liquefied natural gas and a 10% tariff on crude oil, agricultural machinery, large automobiles, and pickup trucks.
In its earnings presentation, AGCO officials said they are evaluating the impact of the tariffs. But because a majority of its sales take place outside the U.S., AGCO is exposed to tariff risks.
“There is substantial uncertainty surrounding these tariffs and the consequences that may arise from the imposition of tariffs on imports from, and exports to, these other countries. These risks may delay or reduce our realization of value from our international operations,” officials stated in the earnings report.
AGCO stock was down almost 4% after the opening bell but clawed back some and was off about 1% as of 10:30 ET, trading at around $102.50. Analysts don’t project much movement in 2025 with a consensus price target of $102 per share.
