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AC

AGCO CORP /DE (AGCO)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue of $2.64B and adjusted EPS of $1.35 both beat Wall Street consensus; revenue by ~$0.14B and EPS by ~$0.27. Management raised full-year net sales and EPS guidance, signaling confidence despite macro/tariff headwinds . Consensus: revenue $2.50B*, EPS $1.08* (14 EPS estimates; 11 revenue estimates)*.
  • Adjusted operating margin was 8.3% (up ~420 bps vs Q1; down ~200 bps YoY) aided by cost controls and restructuring; GAAP EPS was $4.22 due to a $255.2M discrete tax benefit in Q2 .
  • Full-year 2025 guidance raised: net sales ~$9.8B (from $9.6B), adjusted operating margin ~7.5%, EPS $4.75–$5.00 (from $4.00–$4.50); capex reduced to ~$350M (from $375M) .
  • Capital allocation catalysts: new $1.0B share repurchase authorization and regular quarterly dividend of $0.29; TAFE settlement increases strategic focus and flexibility .
  • Management maintains 2025 as trough year, sees modest demand improvement in 2026; near-term North America margins remain negative as AGCO under-produces to normalize dealer inventories .

What Went Well and What Went Wrong

What Went Well

  • Beat on revenue and EPS vs consensus; adjusted operating margin of 8.3% ~100 bps above internal forecast on disciplined SG&A and restructuring benefits . Consensus: revenue $2.50B*, EPS $1.08*.
  • CEO: “AGCO achieved solid second-quarter results…strong earnings and cash flow generation illustrate meaningful progress in reducing dealer and company inventories through aggressive production cuts” .
  • PTX precision ag execution improving: conversion to PTX Trimble guidance receivers nearly complete; >10 innovations targeted in 2025; parts and e-commerce growth supported by “Farmer Core” initiatives and AI chatbots .

What Went Wrong

  • North America remains the weak spot: sales down ~33% YoY ex-FX; operating margin negative (-5.3% in Q2) driven by under-production and discounts; NA margins expected to remain negative in 2H .
  • Adjusted operating margin down YoY (8.3% vs 10.3%) on factory under-absorption and higher discounts amid trough conditions .
  • Tariff headwind increased: CFO now quantifies ~$0.45 EPS headwind for 2025 (vs $0.30 earlier), with EU 15% tariff and delayed pricing actions cited as drivers .

Financial Results

Core financials vs prior year, prior quarter, and margins

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Billions)$3.2466 $2.0505 $2.6350
Adjusted EPS ($)$2.53 $0.41 $1.35
GAAP EPS ($)$(4.92) $0.14 $4.22
Operating Margin % (Reported)(7.4)% 2.4% 6.2%
Operating Margin % (Adjusted)10.3% 4.1% 8.3%

Actual vs Consensus (Q2 2025)

MetricConsensusActualSurprise
Revenue ($USD Billions)$2.4989*$2.6350 +$0.1361*
Adjusted EPS ($)$1.0758*$1.35 +$0.2742*
# of Estimates (Revenue / EPS)11* / 14*——

Values marked with * retrieved from S&P Global.

Segment breakdown (Q2 2025 vs Q2 2024; margins current)

RegionNet Sales Q2’24 ($MM)Net Sales Q2’25 ($MM)Reported YoY %Ex-FX YoY %Operating Margin Q2’25
North America627.2 420.9 (32.9)% (32.2)% (5.3)%
South America315.9 303.4 (4.0)% (4.7)% 7.8%
Europe/Middle East1,869.5 1,774.9 (5.1)% (11.2)% 14.7%
Asia/Pacific/Africa143.5 135.8 (5.4)% (5.9)% 6.9%
Total Segments2,956.1 2,635.0 (10.9)% (14.7)% —
Other (G&P divested)290.5 —(100.0)% ——

KPIs

KPIQ4 2024Q1 2025Q2 2025
Production hours change YoY (%)(33)% (33)% (16)%
Cash from Operations YTD ($MM)—$(212.2) $153.5
Capital Expenditures YTD ($MM)—$48.2 $90.4
Free Cash Flow YTD ($MM)—$(260.4) (CFO minus capex) $63.0
Replacement parts sales YoY (%)——+3% reported; ~–1% ex-FX
Dealer inventory months of supply (approx.)——Europe <4; South America ~3; North America ~9

Note: Free cash flow defined by management as cash from operating activities less capex ; Q2 YTD $63M bridges to $153.5M CFO and $90.4M capex in cash flow statement .

Non-GAAP adjustments in Q2 included $15.6M restructuring, $13.0M PTx Trimble intangibles amortization, $5.8M transaction costs, $6.8M impairments, $12.3M loss on sale of business, and a discrete tax benefit of $255.2M; adjusted net income was $100.2M ($1.35/share) vs GAAP net income $314.8M ($4.22/share) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($)FY 2025~$9.6B ~$9.8B Raised
Adjusted Operating Margin (%)FY 2025~7%–7.5% ~7.5% Top end raised/maintained
EPS ($)FY 2025$4.00–$4.50 $4.75–$5.00 Raised
Capital Expenditures ($)FY 2025~$375M ~$350M Lowered
Effective Tax RateFY 2025—~35% New/clarified
Tariff EPS headwind ($)FY 2025~$0.30 ~$0.45 Increased
Q3 Net Sales ($)Q3 2025—~$2.5B New
Q3 EPS ($)Q3 2025—$1.20–$1.25 New
Share RepurchaseOngoing—New $1.0B authorization New
Dividend per share ($)Quarterly$0.29 (in prior quarters) $0.29 declared for Sep 15, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
Tariffs / macroReaffirmed 2025 outlook despite tariffs; trough year narrative introduced . Q1 guide included tariffs and uncertainty; EPS $4.00–$4.50 .Tariff headwind increased to ~$0.45 EPS; EU 15% tariff included; pricing mitigation lag noted .Headwinds intensified; mitigation ongoing
Production hours & inventoriesQ4: –33% hours; inventory reduced . Q1: ~–33% hours; focus on dealer inventory reductions .Q2: –16% hours; producing to retail in EU/SA; NA down >50% in 2H; NA inventory ~9 months .Progress ex-NA; NA still elevated
Precision ag / PTX TrimbleQ4: platform central to strategy . Q1: continued integration .Conversion to PTX receivers nearly complete; >10 innovations planned; margins improving albeit trough levels .Execution improving
Fendt globalization & shareStrong 2024 performance; share gains .Holding share in Europe; share ticking up in several NA products; pricing strategy will balance tariff costs vs value .Resilient; careful pricing
Parts & Farmer CoreEmphasis on high-margin parts .Parts up 3% reported; e-commerce and AI chatbots driving convenience and wallet capture; 140+ service trucks deployed .Growing structurally
Capital allocation2024 variable dividends; debt issuance for PTX .$1.0B buyback authorized post-TAFE settlements; regular dividend maintained .More shareholder-friendly

Management Commentary

  • CEO: “Operating margins benefited from disciplined cost control and continued implementation of our restructuring initiatives. Demand for our premium brands remains resilient, supported by growing interest in precision agriculture and sustainable technologies” .
  • CEO on trough and outlook: “We continue to believe that 2025 will be the trough…with modestly higher demand in 2026 in all regions. Global tractor sales were the lowest last month of any time in the past fifteen years” .
  • CFO on margin drivers: “Weak industry conditions are resulting in significantly higher costs related to factory under absorption and higher discounts. However, our SG&A expense reduction program is helping to offset some of these volume-related pressures” .

Q&A Highlights

  • Tariff impact quantification: Guide raised to $4.75–$5.00; FX ~+$0.45; incremental tariff headwind ~$0.15 (to ~$0.45 total), with EU 15% tariff and delayed pricing actions noted .
  • North America margin cadence: NA operating margins expected to remain negative in Q3/Q4 with losses “around the 10–11% range,” as production remains down >50% to right-size inventories .
  • Share gains and pricing: Fendt holding share in Europe; several products gaining share in NA; pricing strategy spreads cost across portfolio/geographies rather than directly on tariffed products .
  • Farmer Core and parts: E-commerce and AI chatbots driving higher parts basket sizes and convenience, contributing to resilient parts demand .
  • Buyback cadence: $1.0B program preferred over special dividends; timing contingent on cash availability including $260M proceeds from TAFE share buyback .

Estimates Context

  • Q2 2025 results vs S&P Global consensus: revenue $2.50B* vs $2.64B actual (beat), adjusted EPS $1.08* vs $1.35 actual (beat); 11 revenue estimates*, 14 EPS estimates*.
  • Implications: Raised FY net sales and EPS guidance likely to drive upward estimate revisions for FY 2025 and Q3; however, tariff headwinds and NA margin drag may temper magnitude of upward revisions .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Positive surprise: Solid beat on both revenue and adjusted EPS; adjusted margin expanded sequentially to 8.3% despite under-absorption—demonstrates structural earnings resilience .
  • Guidance raised: FY net sales to ~$9.8B and EPS to $4.75–$5.00; capex trimmed—supports FCF conversion target of 75–100% of adjusted net income .
  • Capital return pivot: $1.0B buyback authorization plus $0.29 quarterly dividend; TAFE settlement enhances governance clarity and strategic flexibility—shareholder-friendly catalyst .
  • Watch NA normalization: Inventory at ~9 months; management under-producing >50% in 2H—expect continued NA margin pressure near-term; monitor Q3/Q4 margin cadence .
  • Tariffs: Headwind increased to ~$0.45 EPS for 2025; mitigation ongoing via pricing and supply chain adjustments—track policy developments and pricing realization timing .
  • PTX/precision ag: Execution improving (channel sign-ups, product rollouts); mid-cycle margin targets (14–15% by 2029) hinge on Fendt globalization, parts, and PTX growth—key to medium-term thesis .
  • Near-term trading: Raised guide and buyback provide support; caution on NA margin negatives and tariff uncertainty. Q3 setup: sales ~$2.5B; EPS $1.20–$1.25 offers visibility to sequential performance .

Appendix: Market and Industry Context

  • Market update: 1H 2025 industry retail tractor sales—NA (13)%, Western Europe (12)%, Brazil +6%; combine sales down NA (33)%, WE (8)%, Brazil (9) .
  • Regional margin resilience: EME operating margin 14.7% vs NA (5.3)% highlighting Europe’s stabilizing role in the portfolio .