4 Farm Equipment Stocks to Watch Despite Ongoing Industry Pressures

Industry Overview - The Zacks Manufacturing - Farm Equipment industry is expected to face challenges due to lower farm income, with a forecasted 0.7% year-over-year dip in net farm income to $153.4 billion by 2026 [4] - Despite short-term challenges, the industry is projected to benefit from rising global food demand driven by population growth and improving living standards, with the U.S. agricultural machinery market expected to grow at a CAGR of 2.38% from 2025 to 2031 [5] - The industry is characterized by major players such as Deere, Kubota, and CNH Industrial, which are the top three global manufacturers of agricultural equipment [3] Trends and Challenges - The U.S. Department of Agriculture (USDA) anticipates total production expenses to rise by 1%, with livestock/poultry purchases, feed, and labor being the primary expense categories [4] - Companies in the industry are facing cost inflation, labor shortages, and tariff-related pressures, prompting them to implement pricing actions and cost-cutting measures to protect profitability [6] - Technological advancements in agriculture, including automation and precision farming, are expected to drive growth, with companies like Deere, CNH Industrial, and Kubota increasing investments in technology [2][7] Company Highlights - Kubota: The company is focusing on smart agriculture initiatives and expects revenue growth in its Farm and Industrial machinery segment, supported by strong construction equipment sales in North America and recovery in Europe [18] The Zacks Consensus Estimate for Kubota's earnings for fiscal 2026 has increased to $4.90 per share, with a trailing four-quarter earnings surprise of 22.2% [19] - AGCO: The company is investing in precision farming technology and has seen strong demand for its products, with a long-term earnings growth rate estimated at 24.4% [24] The consensus estimate for AGCO's 2026 earnings has increased by 2%, suggesting year-over-year growth of 8.5% [24] - Alamo Group: The company is investing in organic growth and strategic acquisitions, including the recent acquisition of Petersen Industries, which is expected to enhance growth and margins [27] The Zacks Consensus Estimate for Alamo's fiscal 2026 earnings implies year-over-year growth of 16.9% [28] - Lindsay: The company has enhanced its irrigation management capabilities through a minority interest acquisition in Pessl Instruments GmbH and is benefiting from rising infrastructure spending in the U.S. [30] The Zacks Consensus Estimate for Lindsay's fiscal 2026 earnings has remained unchanged, with a trailing four-quarter earnings surprise of 15.2% [31] Market Performance - The Zacks Manufacturing - Farm Equipment industry has underperformed its sector but outperformed the S&P 500 over the past 12 months, with an 18.3% gain compared to the S&P 500's 13.9% [11] - The industry is currently trading at a trailing 12-month EV/EBITDA ratio of 30.66X, significantly higher than the S&P 500's 17.70X and the Industrial Products sector's 21.66X [14]