Al Root

AGCO stock fell Tuesday after catching a downgrade. The rating action came right after another brokerage upgraded shares.

Wall Street sure can be confusing. There's a lesson for investors in that observation.

Tuesday, Morgan Stanley analyst Angel Castillo downgraded AGCO stock to Sell from Hold. His price target went to $75 from $94 a share.

Shares of the agricultural equipment maker dropped 4.8% to $80.28, while the S&P 500 and Dow Jones Industrial Average fell 2.2% and 1.7%, respectively.

"While we continue to believe that the Ag equipment cycle is troughing, we see downside risks to earnings," wrote Castillo, adding that dealer inventories are relatively high -- AGCO sells to dealers and dealers then sell to farmers -- and that there are business-execution risks from combining Trimble's precision ag business with AGCO's.

Trimble and AGCO closed a joint venture in 2024 to create a leader in agricultural technology that helps farmers use fewer inputs, such as fertilizer and pesticides, without sacrificing total output.

There have also been slower than expected market-share gains for AGCO's Fendt brand, he says.

It sounds ominous. Still, the downgrade came about a week after Citi analyst Kyle Menges upgraded shares to Buy from Hold.

There are headwinds, such as those Castillo mentioned, but the farming cycle is near a bottom. Farm income in 2024 amounted to about $150 billion, according to the U.S. Department of Agriculture, down from a peak of some $225 billion in 2022. Farm income becomes cash for farmers to spend on products from companies such as AGCO. It earned $15.55 a share in 2023. Wall Street projects $3.94 in 2025.

So, where does that leave investors?

As always, any one upgrade or downgrade goes into the Wall Street consensus. Overall, 35% of analysts covering AGCO stock rate shares Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. About 12% of analysts rate AGCO shares Sell. The average Sell-rating ratio for stocks in the S&P 500 is about 7%.

It's fair to say the Street is lukewarm on AGCO stock now and that analysts are waiting to see a turn in commodity prices and farm income before getting more positive.

That opinion is reflected in Deere ratings, too. Only 42% of analysts covering Deere stock call shares a Buy.

Sentiment hasn't turned yet. A year ago, 50% of analysts covering AGCO stock rated shares Buy, and 52% rated Deere shares Buy.

Investors can pay attention to each comment. But they shouldn't overreact, and they should form their own opinions about stocks and industry outlook -- with the help of Wall Street, of course.

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

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April 16, 2025 16:19 ET (20:19 GMT)

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