Welcome to those of you joining us for AGCO's second quarter 2026 earnings call. We'll also discuss 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, farm income, production levels, price levels, margins, earnings, operating income, cash flow, engineering expense, tax rates, and other financial metrics. This is reflected in our adjusted earnings per share of $1.43, an increase of $0.08 over the prior year.
Operating income was $140.7 million for the quarter, a decrease of 14% year-over-year, with reported operating margins decreasing by 80 basis points to 5.4%. On an adjusted basis, operating margin decreased 170 basis points to 6.6%, driven primarily by lower sales and production volumes and higher input costs, including tariffs. This environment is increasing demand for solutions that help manage costs, improve efficiency, and protect yields. Across many markets, demand remained measured, reflecting affordability considerations, elevated input costs, and a focus on near-term revenue returns.
In North America, industry demand remains soft year-over-year, with continued weakness in higher horsepower equipment as farmers defer larger capital purchases. We're also seeing softer demand in lower horsepower segments, reflecting rural lifestyle customers focused on affordability in the current environment. In Western Europe, industry conditions were mixed as input costs, demand, and capital allocation considerations influenced equipment purchases. Tractor demand showed relative stability year-to-date compared to prior year levels, but weakened during the second quarter.
| Metric | Period | Current guidance |
|---|---|---|
| Full-year net sales | FY2026 | $10.1B-$10.2B |
| Adjusted EPS | FY2026 | $5.50-$5.75 |
| Adjusted operating margin | FY2026 | ~7.5% |
| Pricing realization | FY2026 | 2%-2.5% |
| Currency translation | FY2026 | +2% |
| N. America large ag industry | FY2026 | ~down 15% |
| N. America small ag industry | FY2026 | down 0%-5% |
| Western Europe industry | FY2026 | ~flat |
| Brazil industry | FY2026 | 5%-10% lower |
| Net tariff impact | FY2026 | $95M net ($115M gross less $22M refund) |
| Capital expenditures | FY2026 | $300M-$325M |
| Q3 net sales | Q3 2026 | $2.3B-$2.4B |
| Q3 EPS | Q3 2026 | $0.85-$0.90 |
| Metric | YoY | Note |
|---|---|---|
| Net sales | -1% reported (-4% constant currency) | Weaker demand in Europe and Latin America partly offset by strong North America |
| Adjusted operating margin | -170 bps to 6.6% | Lower sales/production volumes and higher input costs including tariffs, partly offset by pricing and IEEPA refunds |
| Operating income | -14% to $140.7M | Lower volumes and absorption, mainly Latin America |
| North America net sales | +~20% constant currency | Stronger high-horsepower tractor and Hay tool volumes plus market share gains |
| Latin America net sales | -25% constant currency | Challenged industry demand across all major product categories; pricing roughly flat |
| Europe/Middle East net sales | -~5% constant currency | Restrained markets, notably France weak; Germany/UK partly offset |
| Asia-Pacific-Africa net sales | -~6% ex-currency | Higher Australia sales offset by weaker Asian and African markets |
| Replacement parts sales | +3% reported (~flat ex-currency) | Farmers prioritizing maintenance of existing fleets in disciplined spending environment |
| Free cash flow (YTD) | -$347M use vs +$63M prior | Higher first-half production drove greater inventory and working capital investment |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Production alignment | YTD production hours up ~6% | Full-year production now expected slightly lower vs 2025 with second-half cuts in LatAm and W. Europe | — |
| Farmer economics | input cost pressure | Double-digit fuel/fertilizer increases (tied to Strait of Hormuz); farmers cautious, applying less fertilizer | — |
| Tariffs | $45M prior year | $95M net FY2026 (+$50M YoY), $115M gross less $22M IEEPA refund | — |
| Precision Ag / PTx | $860M in 2025 | Flat to modestly up expected; retrofit channel resilient, SymphonyVision spraying +35% and sold out | — |
| Mid-cycle margin target | 14%-15% mid-cycle | Unchanged; operating at ~85% of mid-cycle demand | — |
| Brazil stimulus | no farmer access to special program | Subsidized loan / FINAME program activated late last week, a catalyst for second half plus election-year incentives | — |
| Demand drivers for 2027 | aging fleet | E15 year-round, renewable diesel/SAF, Brazil ethanol (27%->35%), Super El Nino potential support optimism | — |