It's been very tough to be a farmer lately. Higher costs and lower crop prices have squeezed income statements, leaving less money to buy tractors and other farm implements.

The sector has been stuck in a cyclical trough for a while, which, curiously, isn't necessarily a bad thing for farming stocks.

On Thursday night, D.A. Davidson analyst Michael Shlisky launched coverage of the farm-equipment company AGCO with a Buy rating and $160 price target.

AGCO stock rose 2.6% Friday morning to $116.24, while the S&P 500 and Dow Jones Industrial Average were up 0.2% and 0.1%, respectively.

"Ag remains bad -- and that could be good," he wrote.

Buying cyclical stocks at the bottom of the cycle is typically a winning strategy. Still, it requires some timing. Take Deere: It earned about $35 per share in fiscal year 2023. It earned under $19 a share in fiscal year 2025. Things were expected to improve in fiscal year 2026. Earnings-per-share estimates started the year north of $20, but are now down to about $18.

Things will turn around, eventually.

"We have not seen a true upturn in North American Ag Equipment sales yet, but conditions appear ripe for farmer cash incomes to inflect upward in both 2026 and 2027," Shlisky added. "Our proprietary corn and soybean crop models suggest improved incomes in 2026 and 2027 for both crops, with soybeans particularly profitable...2026 is likely the trough."

AGCO and its peers' North American sales are highly correlated with farm incomes.

Shlisky's call for a cyclical trough is positive for Deere and CNH Industrial, too. He rates Deere stock Buy and CNH stock Hold.

As for AGCO, it does a lot of business in Europe, which is in better shape than North America or Brazil, two key growing regions.

Coming into Friday trading, AGCO stock was up 8% year to date and flat over the past 12 months. CNH stock was up 12% so far this year and down 26% over the past 12 months.

Deere stock was up 27% this year and 14% over the past 12 months. Shares peaked early in 2026, when expectations for improvement were high. Now, investors are looking toward 2027 to see higher earnings for the sector.

Write to Al Root at allen.root@dowjones.com

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(END) Dow Jones Newswires

July 10, 2026 10:09 ET (14:09 GMT)

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