Al Root

Tariffs hit agricultural-equipment makers doubly. Import tariffs raise the costs of making tractors and harvesting combines. And the U.S. exports many agricultural products, putting the sector in the crosshairs of countries looking to retaliate.

But there is a price for everything, and recent declines have made shares of agricultural-equipment maker AGCO attractive. On Tuesday, Citi analyst Kyle Menges upgraded AGCO stock to Buy from Hold. His price target dropped to $90 from $98.

An upgrade with a lower price target gives some idea of how the stock has been doing. Coming into Wednesday trading, AGCO stock was down 15% since President Donald Trump announced higher-than-expected tariff rates on April 2.

"The Trump administration's tariffs [should] negatively impact U.S. farmers' exports and profits, likely extending the ag downcycle in North America," wrote Menges. "Retaliatory tariffs on key U.S. agricultural exports like corn and soybeans are expected to hurt farmers, and financial assistance is likely to be used for debt reduction rather than machinery purchases."

That isn't great news, but AGCO is relatively less affected. Almost two-thirds of its sales are generated in South America and Europe. Deere, for comparison, generates about 60% of its agricultural sales in North America, pointed out Menges.

He rates Deere stock at Hold. On Tuesday, he cut his price target to $450 from $480.

AGCO stock was up 2.8% at $80.47 in early trading, while the S&P 500 and Dow Jones Industrial Average gainedwere up 3.1%.

With the new Buy, about 35% of analysts covering AGCO stock have Buy ratings, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for AGCO shares is about $101.

Just over 40% of analysts covering Deere stock have Buy ratings. The average analyst price target is about $497.

Agricultural-machinery stocks aren't that popular these days. Falling earnings are one reason. U.S. farm income is down from peak levels. Less money for farmers means less to spend on equipment.

AGCO is expected to generate about $700 million in 2025 operating profit, down from a recent peak of more than $2 billion in 2023, when farmers were doing better. Deere is expected to generate an operating profit of about $6.3 billion in 2025, down from $12.3 billion in 2023.

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

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April 08, 2025 09:56 ET (13:56 GMT)

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