AGCO CORP /DE (AGCO): what the price assumes

In the published model solve dated 2026-Q2, anchored at $133.40, AGCO CORP /DE (AGCO) is priced for +10.8% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-09-07 · Exported: 2026-09-09 · Source: https://boothcheck.com/report/AGCO

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 8.6% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

The price is justified by relative-multiple.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.9%); the inversion above states its own rate.

Per-Model Detail (n=17)

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• Tractors and combines are approximately 68.8% of our net sales in 2025 and their sales fell approximately 6.4% that year on approximately 5.6% fewer units, which is what a farm equipment downturn looks like from inside the income statement.
• Trailing operating margin sits at 4.7%, well under management's own 2026 adjusted operating margin target of 7.5% to 8.0%, so almost everything the price assumes is a recovery in profitability rather than a recovery in volume.
• Second quarter results land on July 30, 2026, and the number that decides the argument is organic sales growth: first quarter revenue rose 14.3% but only 4.7% once favourable currency translation is stripped out.

Bull Case

On the surface the market appears to be paying a growth company's multiple, roughly twenty-five times operating profit, for a business that sells tractors into a shrinking market. Look at what sits in the denominator and the picture reorganizes itself. AGCO's trailing operating margin is 4.7%. Every industrial company in its comparison set earns more: Timken converts 12.1%, Regal Rexnord 11.2%, Valmont 10.6%, Toro 9.4%, Flowserve 8.3%. AGCO is not being valued at twenty-five times what it normally earns. It is being valued at twenty-five times what it earns at the bottom of an agricultural cycle, which is a very different statement.

The cycle is documented rather than assumed. Sales of tractors and combines, approximately 68.8% of our net sales in 2025, fell approximately 6.4% in 2025 compared to 2024 on approximately 5.6% fewer units, and the company attributes the drop to changes in end market demand. The same pressure shows up next door, with CNH Industrial's revenue down 4.0% over the trailing year. Farmers defer equipment purchases when crop prices and credit conditions turn against them, and then they buy again, because a combine has a working life and eventually reaches the end of it. That is the entire cyclical mechanism and it has not been repealed.

What AGCO has done with the downturn is the part that matters for the recovery. Management started a restructuring in 2024 in response to increased weakening demand in the agriculture industry, expecting charges of approximately $150.0 million to $200.0 million in the initial phase, mostly severance and related costs, and had taken a substantial portion of those charges by the end of 2025. It also sold the grain storage and protein production business, divested on November 1, 2024, removing a lower-return line from the mix. Cutting fixed cost during a downturn is what determines how much of the recovery in volume reaches the operating line when it arrives, and it is visible in the guidance: management expects 2026 net sales of $10.5 to $10.7 billion with adjusted operating margins of 7.5% to 8.0%.

The mix underneath is better than the tractor headline implies. Replacement parts account for roughly a fifth of revenue, and parts revenue does not track new equipment sales; it tracks the installed base of machines already in the field, which keeps growing regardless of what a farmer decides about a new purchase this season. AGCO also sells extended warranty, maintenance and precision technology subscriptions, which the 10-K notes generally have contract durations of more than 12 months. A recurring revenue layer attached to a cyclical hardware business is the most valuable thing a company like this can build, and it is why the trough margin overstates how fragile the earnings power really is.

The first quarter gave the first real evidence that the turn has started. Net sales rose 14.3% to $2.3 billion, and reported net income came in at $0.76 per share against $0.14 a year earlier. A fivefold move in reported per-share earnings is what operating leverage looks like when it works in the right direction, and it is the same leverage the bear case worries about in reverse.

Bear Case

Strip the price down and it rests on one assumption doing nearly all the work: that operating profitability roughly doubles from where it is and then keeps compounding. At around twenty-five times trailing operating profit, the price embeds operating profit growth near 19.3% a year, held rather than hit once. The near-term rate is within what AGCO has managed before. The requirement is persistence, and historically only about 38% of comparable fast growers kept that pace up over a comparable stretch. Nothing in the numbers says the recovery is impossible. What they say is that it has to happen roughly on schedule and then keep happening.

The most fragile piece of that assumption is not the margin target itself but the currency flattering the top line beneath it. First quarter net sales rose 14.3%. Excluding favourable foreign currency translation of 9.6%, they rose 4.7%. Two thirds of the reported recovery in that quarter was the dollar rather than the machinery. A weaker dollar helps the reported numbers and does nothing for the underlying demand, and it reverses without warning. The European business shows the same pattern with the currency effect removed: EME net sales came in at $6,736.7 million in 2025 against $6,712.3 million in 2024, an increase of $24.4 million, which is a flat line dressed as growth.

The valuation calculation is also unusually delicate. Each additional percentage point on the cost of capital moves the implied growth requirement by roughly 7.7 percentage points, which is an extreme sensitivity. A modest shift in what investors demand from a cyclical industrial rewrites what the price is assuming, without a single tractor changing hands. And against its own sector, the multiple sits at the very top of the peer distribution, well beyond the upper quartile. Some of that is the depressed denominator. Not all of it is.

Then there is the balance sheet, which is where a cyclical company gets into trouble if the recovery slips. Net debt of about $2.52 billion amounts to nearly six years of trailing operating profit. That ratio is inflated by the trough and would look ordinary at mid-cycle profitability, which is precisely the point: it is fine if the recovery arrives and uncomfortable if it does not. The debt itself is cheap, with remaining term loans carrying interest rates ranging from 1.983 % to 2.256 %, so the cash cost is low. The refinancing risk is the part that only matters if margins are still depressed when maturities come due.

Competitively AGCO is the smallest of the three major players and it says so. The 10-K names Deere & Company and CNH Industrial N.V. as its principal global competitors, notes rivals that have greater financial and other resources and may substantially increase the resources devoted to the development and marketing, including discounting of competing products, and observes that the industry is attracting technology-focused companies and start-up ventures as technology increasingly impacts all aspects of the crop cycle. Deere turns over $47.4 billion of revenue against AGCO's roughly $9.5 billion. In a downturn, the company with five times the scale sets the discounting, and the smaller one decides whether to follow it or lose the sale.

Valuation

What the price is betting on is a margin, not a market. Today's quote works out to roughly twenty-five times what the company earns from operations, and inverting that produces a requirement of about 19.3% annual growth in operating profit, sustained rather than achieved once. Almost all of that requirement can be met without selling a single additional tractor, because the starting margin is 4.7% and management's own 2026 target for adjusted operating margin is 7.5% to 8.0%. Hit that and most of the arithmetic takes care of itself. The bet is on operational recovery, and the recovery has a named plan behind it.

Two features of that calculation deserve to be carried alongside it. The first is the sensitivity: each percentage point added to the cost of capital moves the implied growth requirement by about 7.7 points, which makes this one of the more rate-sensitive setups a cyclical industrial can produce. The second is the peer comparison, where the multiple sits at the very top of its sector distribution, well beyond the upper quartile. Both of those readings are consequences of the same depressed denominator, and both would normalize if the margin does.

The methods used to triangulate the value split along exactly that line. Approaches anchored on book value and on the company's current earning power land close to today's price, within a tenth of it in both cases. Peer multiples land above the price, which is unusual and reflects the sector trading on normalized rather than trough earnings. The one family that lands well below the price is the discounted cash-flow group, and the reason is visible in how it was built: it projects forward from the recent trend, which for AGCO means extrapolating a downturn. When the cash-flow methods are the outlier and they got there by carrying a cyclical low forward, the disagreement is a statement about the input rather than about the company.

Against the cohort the shape is clear enough. Timken converts 12.1% of revenue to operating profit, Regal Rexnord 11.2%, Valmont 10.6%, Toro 9.4%. AGCO's 4.7% is the outlier in a group of industrials whose end markets are not in the same place in their cycles. CNH Industrial, the closest true comparison, saw revenue fall 4.0% over the trailing year, which confirms that the weakness is the industry's rather than the company's.

Where the leverage bites is the balance sheet. Net debt of about $2.52 billion amounts to close to six years of trailing operating profit, a burden that reflects the trough more than the borrowing. Remaining term loans carry interest rates ranging from 1.983 % to 2.256 %, so the annual cash cost of that debt is modest, and the share count has drifted down about 0.7% a year over four years. A buyer at this price is underwriting a margin recovery on a balance sheet that has room for the recovery to be late, but not for it to be cancelled.

Catalysts

The next checkpoint is dated and close. AGCO reports second quarter 2026 results on Thursday, July 30, 2026, with the call at 10 a.m. Eastern. The line to read first is not headline revenue but the currency-adjusted figure underneath it. First quarter net sales rose 14.3% to $2.3 billion, and stripping out favourable foreign currency translation of 9.6% leaves 4.7%. If the second quarter shows organic growth accelerating, the recovery thesis is intact. If the gap between reported and organic widens again, the reported number is measuring the dollar.

The full-year framework management set is the second thing to check against. AGCO guided 2026 net sales to a range of $10.5 to $10.7 billion with adjusted operating margins of 7.5% to 8.0%, citing pricing discipline, cost management and operational alignment. Because the price is essentially an assumption about margin recovery, any revision to that margin range carries more weight than an equivalent revision to the sales range. Reported first quarter net income of $0.76 per share against $0.14 a year earlier is the baseline the second quarter will be measured against.

The restructuring is the third strand and it is largely behind the company now. The program launched in 2024 carried expected charges of roughly $150 million to $200 million in its initial phase, and a substantial portion had been taken by the end of 2025. That matters for the shape of 2026 and 2027: the cost has mostly been paid, so what remains is whether the lower cost base converts into the margin management has promised when volumes come back.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• DE (DEERE & CO)
• FY2025 10-K: …factors in all markets include product performance, technology features, innovation, quality, distribution, sustainability, financing, customer service, and value. John Deere's brand recognition is a competitive factor in North America and many other parts of the world. The agricultural equipment industry continues…
• FY2025 10-K: ​ Sales volume and other ​ ​ ​ ​ ​ ​ ​ -8 ​ Price realization ​ ​ ​ ​ ​ ​ ​ +1 ​ Currency translation ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating profit ​ ​ 1,207 ​ ​ 1,627 ​ -26 ​ Operating margin ​ ​ 11.8% ​ ​ 14.8% ​ ​ ​ ​ Sales volumes decreased 17% in the U.S. and Canada, partially offset by an increase of 26% in India and 5% in…
• CNH (CNH INDUSTRIAL N.V.)
• FY2025 10-K: …of attachments for specialized applications, such as skid steer loaders, compact track loaders and mini-crawler excavators. Industrial Activities Competition The agriculture and construction equipment industries are highly competitive at both global and regional levels. We compete with: (i) large global full-line…
• FY2025 10-K: …competitive pricing, particularly in emerging markets and during downturns. Compliance with evolving engine emissions standards is a critical competitive factor, particularly in regions subject to frequent regulatory change such as Europe and North America. New legislation in India and China has also further…
• TTC (THE TORO COMPANY)
• FY2025 10-K: …competitors that have substantially larger operations and financial resources than we do and some that have smaller operations offering various capabilities to customers. We also experience a certain level of competition among our own brands within certain industries and end markets. Because of the diversity of our…
• FY2025 10-K: …example, demand; inflation; deflation; changing prices; foreign currency fluctuations; tariffs; duties; trade regulatory actions; industry actions; the inability of suppliers to absorb incremental costs related to inefficiencies, continue operations or otherwise remain in business; financial difficulties; changes to…
• TKR (TIMKEN CO)
• FY2025 10-K: Industrial Corp. The e-business service focuses on information and business services for authorized distributors. Timken has entered into individually negotiated contracts with some of its customers. These contracts may extend for one or more years and, if a price is fixed for any period extending beyond current…
• FY2025 10-K: …condition or results of operations could be negatively affected. Risk Relating to our Business The bearing and industrial motion industries are highly competitive, and this competition results in significant pricing pressure for our products that could affect our revenues and profitability. The global bearing…
• RRX (REGAL REXNORD CORP)
• FY2025 10-K: …have an adverse effect on our business, results of operations and financial condition. In certain markets, customers exercise significant power over business terms. There is substantial and continuing pressure on major OEMs and larger distributors to reduce costs, including the cost of products purchased from outside…
• FY2025 10-K: …based on the segment's income from operations. The Company also regularly provides to the CODM information on adjusted cost of sales and adjusted engineering, selling and administration expenses, which are significant expenses. The following sets forth certain financial information attributable to the Company's…
• GTLS (CHART INDUSTRIES, INC.)
• FY2025 10-K: …their needs and in determining appropriate products to meet those needs. Portions of our engineering expenditures are typically charged to customers, either as separate items or as components of product cost. Competition We believe we can compete effectively around the world and that we are a leading competitor in…
• FY2025 10-K: …orders in retrofit, spares and servicing offset by lower leasing orders. Repair, Service & Leasing segment backlog totaled $819.7 million as of December 31, 2025, compared to $577.1 million as of December 31, 2024, an increase of $242.6 million. Liquidity and Capital Resources Our debt instruments and related…
• FLS (FLOWSERVE CORP)
• FY2025 10-K: …Company's products and services are based on technological advances. In addition, the Company will need to compete for talent that is familiar with such technologies, including upskilling its workforce. There can be no assurance that the Company will continue to compete effectively with its industry peers as new…
• FY2025 10-K: …this Annual Report. Business Functions Our business segments share a focus on industrial flow control technology and have a number of common customers. These segments also have complementary product offerings and technologies that are often combined in applications that provide us a net competitive advantage. Our…
• VMI (VALMONT INDUSTRIES INC)
• FY2025 10-K: …investments in mechanized irrigation systems. The demand for mechanized irrigation arises from several sources: the conversion of traditional flood irrigation systems, the replacement of older mechanized systems that are beyond their useful life or technologically obsolete, and the transition from non-irrigated land…
• FY2025 10-K: …regions, it may be difficult to find skilled management for specific roles. If we struggle to attract and retain these critical skills, it could negatively impact our ability to grow profitably in the future. We face strong competition in the markets we serve. We experience competitive pressures from various…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.