Welcome to those of you joining us for AGCO's first quarter 2026 earnings call. We'll address demand, product development and capital expenditure plans and timing of those plans, and our expectations concerning the costs and benefits of those plans and timing of those benefits. We'll also cover future revenue, crop production and farm income, production levels, price levels, margins, earnings, operating income, cash flow, engineering expense, tax rates, and other financial metrics. With differing industry conditions across regions, the year-over-year improvement highlights our ability to perform consistently and deliver solid results across varied demand environments.
Operating income increased more than 60% year-over-year to $80.7 million, with reported operating margin expanding 100 basis points to 3.4%. On an adjusted basis, operating margin improved 50 basis points to 4.6%, driven by better volume leverage and ongoing benefits from business optimization initiatives, partially offset by higher cost inputs, including tariffs. The performance delivered this quarter supports the increased durability and resilience of our earnings model. We also continue to emphasize structured working capital management and inventory alignment.
We are encouraged by the progress delivered this quarter and remain fully focused on executing our plans to drive sustainable margin enhancement, cash generation, and long-term value creation. While fleet ages continue to increase, farmer purchasing activity reflects a measured and thoughtful approach shaped by the current macro environment. Farmers continue to defend more capital-intensive purchases amid current farmer economics, evolving grain export demand, and elevated input costs. In Western Europe, industry tractor sales increased compared to softer prior year period, with growth across most of Western European markets.
| Metric | Period | Current guidance |
|---|---|---|
| Adjusted EPS | FY2026 | ~$6.00 |
| Tariff costs | FY2026 | ~$135M |
| Restructuring cost savings | FY2026 | $60M-$70M |
| Net pricing | FY2026 | 2%-3% (reaffirmed) |
| FX benefit to sales | FY2026 | ~3% |
| North America large ag industry | FY2026 | down ~15% vs 2025; small ag modestly higher |
| Western Europe industry | FY2026 | up modestly |
| Brazil / Latin America industry | FY2026 | modestly below 2025 |
| Production hours | FY2026 | broadly flat to modestly lower vs 2025 |
| Free cash flow conversion | FY2026 | 75%-100% of adjusted net income |
| Global demand vs mid-cycle | FY2026 | ~86% of mid-cycle |
| Metric | YoY | Note |
|---|---|---|
| Net sales | +14% (~+5% ex-currency) | Stronger EME vs weak prior-year period that included dealer destocking |
| Reported operating income | +60% to $80.7M | Better volume leverage and business optimization, partly offset by higher costs including tariffs |
| Adjusted operating margin | +50bps to 4.6% | Strong EME execution and cost discipline |
| Adjusted EPS | more than doubled to $0.94 | Operating leverage off low cycle levels plus a lower adjusted tax rate |
| Europe/Middle East net sales | +9% ex-currency | Higher unit volumes and high-horsepower tractor growth in Germany and UK |
| North America net sales | +9% ex-currency | Higher units and share gains in high-hp tractors, hay equipment, and sprayers |
| Latin America net sales | -30% ex-currency | Very measured purchasing amid challenging Brazil and Argentina conditions |
| Asia Pacific Africa net sales | +20%+ ex-currency | Higher sales in Australia and South Africa, offset by weaker Asia |
| Replacement part sales | +3% reported / -6% ex-currency (~$447M) | Wet European weather limited consumption and North American dealer inventory optimization |
| Factory production hours | +15% | Rebound off a very low Q1 2025 base, driven by Europe |
| Free cash flow | use of $455M | Normal seasonal inventory build vs unusually low prior-year production |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Operating around the trough of the cycle | — | Inventories normalizing; gradual, uneven recovery expected rather than near-term rebound | — |
| Structural margin durability toward 14%-15% mid-cycle target | — | Leaner cost structure and disciplined production delivering more resilient margins across demand conditions | — |
| Dealer inventory destocking | — | Europe just under 4 months (target), Latin America down to 4 from 5, North America ~7 vs 6-month target | — |
| AI and precision ag (PTx, SymphonyVision, Outrun) | — | New PTx innovations (SymphonyVision Duo, ArrowTube); Outrun won Davidson Prize again; full farm autonomy targeted by 2030 | — |
| Tariffs | ~$110M / +$65M vs 2025 | ~$135M / +$90M vs 2025 after IEEPA ruling and Section 232 methodology change | — |
| Capital returns | $300M buyback announced Oct 2025 | Additional $350M buyback in Q2; dividend raised to $0.30 (from $0.29) | — |
| AGCO Finance JV restructuring | — | Selling 49% US/Canada JV stakes to Rabobank for ~$190M, incremental to FCF, funding buybacks | — |
| FarmerCore distribution model | — | Rolling out proactive on-farm service model, driving North America share gains in large ag | — |