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AC

AGCO CORP /DE (AGCO)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered modest top-line growth ex-divestiture and strong margin execution: net sales $2.476B (-4.7% YoY; +~6% ex-2024 G&P divestiture), reported diluted EPS $4.09 and adjusted EPS $1.35; adjusted operating margin 7.5% (+200 bps YoY) .
  • Versus S&P Global consensus, AGCO posted a slight revenue beat ($2.476B vs $2.470B*) and a significant adjusted EPS beat ($1.35 vs $1.22*), while EBITDA was below consensus ($242M* vs $260M*).*
  • Guidance: Full-year 2025 outlook reaffirmed/raised on EPS—net sales ~$9.8B, adjusted operating margin ~7.5%, adjusted EPS ~$5.00, capex trimmed to ~$300M (from $350M) .
  • Regional divergence persists: Europe/Middle East (EME) strength (sales +20% cc, ~15.6% margin) offsetting North America weakness (sales -32% cc, negative margins) as management aggressively underproduces to destock NA dealer inventories (down to ~8 months) .
  • Capital returns and structural actions are incremental catalysts: $300M buyback to start in Q4 using $230M after-tax proceeds from TAFE stake sale; ongoing “Project Reimagine” delivering structural cost reductions ($175–$200M targeted) .

Values with asterisks (*) are retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • EME operating leverage and margins: EME net sales up 20.3% cc; operating income +$163M with ~15.6% regional margin on higher volumes and recovery from last year’s downtime .
  • Cost and cash execution: Adjusted operating margin rose to 7.5% (+200 bps YoY) despite trough conditions; YTD free cash flow improved materially (management cited ~$65M YTD and ~+$450M YoY improvement), aided by working capital and lower capex .
  • Shareholder returns and portfolio focus: Completed TAFE divestiture ($260M; $230M after-tax proceeds) and announced $300M buyback beginning Q4; management reiterates $1B repurchase authorization and shift from special dividends to repurchases .
  • Management quote: “We delivered a strong third‑quarter performance… disciplined production cuts, aggressive cost management, and accelerated strategic restructuring initiatives.” — CEO Eric Hansotia .

What Went Wrong

  • North America remains a drag: Sales -32.1% cc YoY; segment margins remain negative amid >50% underproduction to reduce dealer inventory; Q4 NA production cuts to exceed 50% .
  • Pricing pressure and tariffs: 2025 pricing outlook trimmed to 0–1% (from ~1%) due to competitive pressure in South America/Europe; tariff net EPS headwind increased to ~$0.45 (from ~$0.30) by Q2; 2026 absolute annual tariff costs guided to <1% of sales before mitigation .
  • South America mix and one-offs: Softer mix (less large HP) and a warranty spike pressured margins sequentially; 4Q24 benefited from a 1–1.5% R&D tax credit in Brazil that will not repeat in 4Q25 .

Financial Results

Headline Q3 2025

MetricQ3 2025
Net Sales ($B)$2.476
Reported Diluted EPS ($)$4.09
Adjusted EPS ($)$1.35
Operating Margin (%)6.1%
Adjusted Operating Margin (%)7.5%

Revenue and Reported EPS – Trend (oldest → newest; S&P Global)

MetricQ1 2025Q2 2025Q3 2025
Net Sales ($B)$2.051*$2.635*$2.476*
Reported Diluted EPS ($)$0.14*$4.22*$4.09*

Values with asterisks (*) are retrieved from S&P Global.

Operating Margins – Trend (oldest → newest)

MetricQ1 2025Q2 2025Q3 2025
Operating Margin (%)2.4% 6.2% 6.1%
Adjusted Operating Margin (%)4.1% 8.3% 7.5%

Q3 2025 vs. S&P Global Consensus

MetricActualConsensusDelta
Adjusted EPS ($)$1.35 $1.215*+$0.135 (beat)
Revenue ($B)$2.476 $2.470*+$0.006 (beat)
EBITDA ($M)$241.9*$259.7*-$17.8 (miss)

Values with asterisks (*) are retrieved from S&P Global.

Segment Performance (Q3 2025)

RegionNet Sales ($M)YoY %CC YoY %Regional Operating Margin
North America383.0(32.1)%(32.1)%(10.5)%
South America322.4(8.1)%(9.5)%5.7%
Europe/Middle East1,613.827.5%20.3%15.6%
Asia/Pacific/Africa157.1(5.9)%(5.2)%4.9%
Total2,476.3(4.7)%(8.4)%—

All segment sales and FX disclosures: . Regional margin performance: .

Selected KPIs

KPIQ3 2025
Dealer Inventory – EuropeJust over 3 months; near target
Dealer Inventory – South America~4 months; slightly above target
Dealer Inventory – North America~8 months; improving but above target
Q3 Replacement Parts Sales~$498M (reported +2% YoY; -~2% ex-FX)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net SalesFY 2025~$9.8B (raised from $9.6B in Q1) ~$9.8B Maintained vs Q2
Adjusted Operating MarginFY 2025~7.5% ~7.5% Maintained
Adjusted EPSFY 2025$4.75–$5.00 ~ $5.00 Tightened/up modestly
CapexFY 2025~$350M ~$300M Lowered
Effective Tax RateFY 2025~35% 33%–35% Slightly improved
Pricing AssumptionFY 2025~1% 0%–1% Lowered
Share RepurchasesQ4 2025$1B authorization announced $300M to commence in Q4 Implementing

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Tariffs & PricingTariffs a ~$0.30 EPS headwind; pricing ~1%; mitigation via supply chain/pricing Net tariff headwind ~$0.45 EPS; 2026 absolute tariff costs <1% of sales before pricing; pricing trimmed to 0–1% Headwind intensifies; cautious pricing
North America destockUnderproduction focused in NA; dealer months ~9 in Q1; still negative margins NA dealer inventory down to ~8 months; production >50% below prior; margins remain negative Progress, still a drag
EME resiliencyMid-teens margins; stability; Fendt share gains EME +20.3% cc, ~15.6% margin; top regional profit driver Strengthening
South AmericaRecovery led by low/mid HP; SA margins improving in Q2 Mix headwind, warranty blip; prior-year R&D tax benefit won’t repeat Mixed
Precision Ag (PTx) & AutonomyPTx integration, channel build, profitable in Q1; innovations pipeline FarmEngage platform launched; OutRun autonomy expanding; >90% AGCO machines with Trimble tech Execution advancing
Cost program (Reimagine)$100–$125M run-rate by YE25; additional $75M by YE26 $175–$200M total program; 2026 incremental benefit $40–$60M Building tailwind
Capital returnsTransition to buybacks post-TAFE; $1B authorization $300M buyback in Q4; regular $0.29 dividend Accelerating

Management Commentary

  • “Consolidated operating margins were 6.1% on a reported basis and 7.5% on an adjusted basis… despite significant production cuts in North America as part of our ongoing efforts to destock the dealer channel.” — CEO Eric Hansotia .
  • “We expect to begin repurchasing $300 million of shares in the fourth quarter… We remain focused on deploying capital effectively to drive long-term shareholder value.” — CFO Damon Audia .
  • “PTx launched 11 new innovations this year… Our innovation engine is probably running ahead of schedule. Financials are on track. Channel development is on track.” — CEO Eric Hansotia .
  • “Adjusted operating margin to be approximately 7.5% [for FY25]… tax rate revised to 33%–35%.” — CFO Damon Audia .

Q&A Highlights

  • Europe outperformed expectations on volume; dealer inventories “below optimal level,” positioning the region well into 2026 .
  • North America inventory path: at ~8 months; further underproduction (>50%) in Q4; timing to hit 6-month target depends on 2026 demand; NA margins to remain negative near term .
  • Tariff cadence and sizing: 2026 absolute tariff costs <1% of sales before pricing; net P&L impact mitigated by global pricing actions; peak flow-through likely by Q2 2026 as inventories turn .
  • Restructuring benefits: incremental $40–$60M EBIT benefit in 2026 vs 2025 as programs ramp; part of structural margin uplift through the cycle .
  • South America: Mix shift away from large HP and non-recurring 4Q24 tax benefit weigh on margins; warranty higher YoY in Q3 .

Estimates Context

  • Q3 2025: AGCO beat S&P Global adjusted EPS consensus by $0.14 ($1.35 vs $1.215*), modestly beat revenue ($2.476B vs $2.470B*), and missed EBITDA ($242M* vs ~$260M*).*
  • Implication: EPS upward bias from stronger EME margin and cost control despite EBITDA shortfall; competitive pricing and NA underabsorption remain estimate constraints into Q4 .

Values with asterisks (*) are retrieved from S&P Global.

Key Takeaways for Investors

  • EME strength and structural cost actions are offsetting NA destock pain, supporting mid-to-high single digit adjusted operating margins at industry trough levels .
  • Q3 showed a clean adjusted EPS beat vs consensus and a revenue beat, but EBITDA softness highlights underabsorption and pricing pressure—watch Q4 margin cadence (>9% exit implied) .
  • Near-term catalysts: execution of $300M buyback in Q4; visibility on tariff frameworks and any U.S.-China ag trade support; progress towards NA dealer inventory normalization .
  • 2026 setup: incremental $40–$60M restructuring tailwind, potential stabilization/flattening in global units, and normalization of NA production could lift margins even at flat volumes .
  • Risks: tariff volatility, NA large ag demand sensitivity, competitive discounting in SA/Europe, and FX .
  • Medium-term thesis: portfolio mix shift (Fendt, Parts, PTx), structural cost reductions, and balanced geographic footprint to drive higher highs/lows through cycles; management reiterates confidence in ~7.5% FY25 adjusted operating margin and ~$5 EPS .

Appendix: Source Highlights

  • 8‑K/Press Release (Q3 2025 results): net sales, EPS, margins, guidance, regional sales/FX, non‑GAAP reconciliations .
  • Q3 2025 Earnings Call: margin drivers, NA underproduction, pricing/tariffs, PTx/autonomy updates, FY25 guidance detail .
  • Prior quarters: Q2 call (margin, guidance ranges, tariff update) ; Q1 call (margin, tariff framing, cost program) .
  • Other press releases: TAFE sale (proceeds) ; quarterly dividend ($0.29) .

Values marked with asterisks (*) are retrieved from S&P Global.