AGCO Corporation (AGCO) Earnings Call Transcript & Summary

All right. I'm Kyle Menges, I'm the U.S. Machinery analyst at Citi. I'm joined by the AGCO team. I've got Damon Audia, CFO; and Greg Peterson from IR. Thanks for being here with us today, guys.

Yes. I mean, maybe to kick off, a lot has been going on with AGCO over the last several years, some transformative things I think that you guys have been doing. But yes, maybe talk about the key brands, product portfolio, how that's transformed over time and the cycle-over-cycle improvement that you've driven as well in the last several years?

Yes, sure. So I agree a lot has happened. Maybe for those who are less familiar with AGCO, we are the largest pure-play ag company. Last year, we delivered revenues just over $10 billion. We go to market from an equipment side with 3 major brands, our Fendt brand, which is premium, the best of the best. And then we have 2 more volume-orientated brands called Massey Ferguson and Valtra. And then we have our technology stack, which is the PTx umbrella, which includes our former Precision Planting brand, along with the PTx Trimble joint venture and then a few other smaller acquisitions that we've done, but consider that our tech stack. Over the last couple of years, we've made a couple of significant changes that have really allowed us to focus ourselves on the equipment and the technology space. So one was the joint venture with Trimble. So we did an 85%, 15% joint venture with Trimble, where we now control all of their Ag business. That was part of our PTx portfolio. At the same time, when we did the acquisition of the joint venture, it allowed us to divest or go through the process of divesting our Grain & Protein business. And so with the divestiture of that in 2024, it's really allowed us to hone our business now to be solely focused on equipment and technology. And when I look at how we've transformed the business over the last several years, last year, we finished in 2025 when our industry was just over 85% of mid-cycle. So relative to the 10-year average, last year was around 85% of that 10-year average. So it's at the lowest point we've seen. The last time that the industry was at that level was 2016. We delivered 7.7% margin last year, which is almost double what we did in 2016. So we look at how we've transformed the business, driving improved profitability of our core business and growing our high-margin core businesses like Fendt, PTx and our parts business, we've really transformed the business to make it more profitable and I think more importantly, more resilience on the downside, which really gives us a lot of confidence as we talk about where we want to go longer term and getting those operating margins up to that 14% to 15% level as we get closer as we get to the mid-cycle levels.

Awesome. And then maybe we can talk about the Precision Ag piece of the business a little bit. It's been an increasing area of focus over the last few years, driven by your Farmer-First retrofit mixed fleet approach. Maybe you can elaborate a little bit on that strategy, how you think this positions you to win in what's become a competitive precision in that market?

Yes, sure. I think for us, the PTx portfolio and our approach on technology, it's an evolving industry. Technology is becoming more and more prevalent around the world. All of our competitors are heavily focused on it as well. But there's a couple of things about AGCO and our approach to technology, which differentiates us versus the competitors. I think first is, technology for us starts in the retrofit market. So when you think about the new technologies that we're bringing, we bring them into the retrofit market. We have a mixed fleet mindset. So when you think about what is being sold through our PTx portfolio, our views are that, that technology goes on any make, and farmers are getting the level of productivity that they need, whether they're using an AGCO piece of equipment or a competitive piece of equipment. So that's sort of one unique differentiator. Two is how we approach that market is through a stand-alone distribution channel. And we are the only ones in the industry that have 2 different channels. We have our new equipment channel, and we have this sort of PTx channel, which is usually think of them as seed salesmen, agronomists, people that are more on the farm, trying to drive productivity, trying to drive yield enhancements and using technology to drive that. And because we have that unique go-to-market philosophy, it creates an opportunity for us to get the technology out sooner. It allows the farmers to explore that technology at a much lower price point than what he or she may have to do in buying a branded piece of equipment. And so for us, we think that opens up a much larger percentage of the market. So we think the addressable market for us is much larger than others because of that separate channel, because of that mixed fleet mindset. Now we hear our competitors talk about retrofit. I think a little bit unique is when they think about the term retrofit, it's more akin to their products, usually akin to newer generations of their products versus ours being all makes and having a much longer vintage that it can serve. And then secondly, when they use the term retrofit, a lot of times that is sold through their new equipment channel versus ours, which is a separate independent channel. So if you put yourself as a dealer who's looking to sell a planter, do you sell a brand-new planter to that farmer or are you willing to sell him or her an upgrade kit at a much lower price point, creating a little bit of a conflict for that individual making the sale because we have 2 separate channels, 2 different people attacking the problem in 2 different ways on that firm.

Yes. That's helpful. Maybe that's a good segue into the PTx business and talk a little bit about the Trimble JV, what merits you saw in the deal, how that integration is going, what inning we're in, in that integration? What are really the key focus areas you're looking at now and the near term, too?

Yes. The overall PTx portfolio is incredibly strong, and we have the most technology offerings in a retrofit versus anyone else in the industry. So we're very excited about what we have underneath the PTx umbrella. If I look at PTx Trimble and how that's gone, obviously, we bought it at the peak of the cycle. But when we looked at what we were getting, it was imperative for us longer term as we think about things like autonomy to be able to have that technology in-house versus having to get it from a third-party provider. If I look at the different components and how they're going, I would say, culture and people have gone exceptionally well. We really haven't lost any of the talent because you took an ag group in a technology company and you brought them and made them the tech group in an ag company. And as they got to see and hear our Farmer-First mindset being on farm, solving the problems, I would tell you the culture has gone exceptionally well. The team that we've kept together has gone really well. I look at the innovation, the flywheel is better than we had expected. We had been thinking 4 or 5 new products. Last year, we introduced 14 new products under the PTX umbrella, and we've already introduced several more at our winter conference in January. So technology flywheel hitting on all cylinders right now. I would say the cost area, we said when we announced the transaction, we'd see around $33 million of cost savings by the third full year. Given the industry environment, we're feeling pretty good. We've pulled a lot of that ahead. So I feel like we'll get those numbers before the third year. The last part is the dealer channels. We've talked about synergies, bringing PTx Trimble portfolio alongside Precision Planting, and we have this embedded under what we call these Elite dealers. So again, it's not that new equipment channel. This is a separate dealer channel who's selling the full suite of technology offerings. So things from guidance to planting equipment to spraying equipment to water management, bringing those dealers who Trimble had and what we had, bringing them together under this Elite dealer. In '25, we went from around 40 Elite dealers to over 70. This year, we'll grow that by another 50%. So I think that's going okay. Obviously, we want to go faster, but we've got to get them to a level of education where they can sell that whole suite of offerings. So I think the excitement is there. The dealers are very excited about what they're seeing with the portfolio. It's just continuing to ramp up that Elite dealers and letting them penetrate more on the farms with the full suite of offerings versus maybe what they have sold legacy, which may have been more Trimble orientated or more Precision Planting orientated. So I think overall, we're -- I'd say, we're sort of in the middle innings in total, but really building a strong foundation with those Elite dealers to grow as the industry starts to pick up hopefully next year.

And you mentioned that distribution work going okay. Is it the numbers -- how are the numbers of you signed up -- you went from 40 to 70 last year, targeting a 50% increase this year. Are the numbers on track with your initial expectations? Or is just developing that channel taking a little bit longer?

I think overall, the numbers are fairly close to what we had thought. If you look at the PTx dealers, you have a couple of different components. You have the base dealers and think of those, there was the CNH dealers who we were partnering with under the old Trimble. We have over 200 CNH dealers. We have several hundred Massey Ferguson, Valtra and Fendt dealers signed up. Those are selling more of the base products. That's gone incredibly well. I'd say, very much in line with what we were hoping to achieve. The Elite dealers that are selling the full portfolio of technology. That's sort of gone maybe a little bit slower because of the industry. There's not that pull because as the industry has been slowing down, farmers are a little bit hesitant in investing in things that maybe are yield enhancing. And so getting those dealers up to speed on all of the technology has taken us a little bit longer. Good momentum. But the key for us is more now that they have it, how do you penetrate your areas and grow your share in these respective markets. And it's not conquesting share, but it's just getting on to the farms and showing these farmers what is the technology available for them to either reduce their input cost or to drive improved yield from what they have today.

Yes. That's helpful. Could we talk a little bit about the performance of the PTx business, just how it's performed in the down cycle? Additionally, you had commented on the fourth quarter earnings call, you expect PTx revenues, I think, to be flattish roughly in 2026, I believe. Just what are some of the key assumptions in that outlook? And then I was also thinking maybe why wouldn't it be growing more just given the momentum you're seeing in that distribution channel signing up more of those Elite dealers?

Yes. So I think there's a couple of components to unpack. Last year, the PTx revenues were right around $860 million, we said flat. So modestly up this year. But when you break it down, there's really 3 components in the PTx revenue stream. First component is what we sell to AGCO. So we were -- when we give you that $860 million, that would include PTx sales to Fendt, Massey and Vault for OE. So directionally, 1/3 of that is going into my equipment. The second bucket is the other OEMs. So we have relationships with over 100 different other OEMs. So another 1/3 of that bucket is sort of a non-AGCO OEM sale. And then your third bucket is this retrofit channel. Those first 2 are being heavily influenced by the industry. So those 2, we see the industry overall being relatively flat, obviously, down significantly here in North America. The third channel, the retrofit channel is actually growing. And so you're really seeing the net of those 3 channels delivering that flat to modest growth. But to your point, we are seeing the retrofit because farmer net income is limited this year. We know it will be challenged. They're looking for ways to drive improved yields or lower input costs, and they're able to do that at a much lower entry point by using this retrofit type of equipment, where generally our philosophy is a 1-year, maximum 2-year payback. So if you're a farmer knowing your net farm income is going to be limited this year, but there's opportunities to reduce your input cost and you know you got a 1-year, worst case 2 years, that's an easier value sell for him or her right now than trying to convince them for a 2- or 3-year payback.

Yes. I mean that's good to hear. And I think you had said on the earnings call, the retrofit channel actually was kind of flattish last year and you're targeting growth this year. So flattish in a down year last year, growth in a flattish year for the market. Okay. Got it.

Yes. And we view that to be a less cyclical. Again, it's still cyclical, but significantly less cyclical than the new equipment market. And as we look at that growing as part of our overall portfolio to get the Precision Ag or, the PTx revenue up to $2 billion and you couple that with our parts business, which is generally growing every year, those 2 together create a much more stable base for us for our earnings as we continue to deal with the volatility of the new equipment sales longer term.

Yes. Yes. Makes sense. I would like to focus then on the PTx, the FarmENGAGE platform you rolled out last year, which from my understanding is being integrated into all model year '26 machines. Your road map suggests that you're in Phase 2 of the data platform this year, focusing on consolidating features to the common platform. What should we be thinking about in terms of incremental value as you go from Phase II to Phase III that you're bringing to customers? And in your mind, just how do you think FarmENGAGE stacks up against some of the peers' platforms?

Yes. So FarmENGAGE in many ways for us was a little bit of the missing link as we talk about penetrating and growing the market -- Fendt market share here in North and South America. So FarmENGAGE is available on model year '26 on Fendt and Massey products here in North America, not necessarily available in other parts of the world, generally speaking. But what it does is, again, similar to that retrofit mindset, mixed fleet mindset, FarmENGAGE is that farm management system that caters to the mixed fleet. And so as we think about Fendt growing and really penetrating competitive farms, oftentimes forcing that farmer to create a mixed fleet in his or her fleet to bring a Fendt product in or maybe a Massey product, the data was always one of the challenges because they were using a competitor system, and it was not always easy to connect and do the task management, some of the planning for the farm with the competitive data management system or farm management system and a Fendt product. With FarmENGAGE, that now sits on top of any of the legacy systems, and it allows that farmer to still use his or her legacy system for data or the data repository. But if you think about task management and all of the planning that you have to do on the farm, you can now do that in FarmENGAGE and you can do that for an AGCO piece of equipment or a competitive piece of equipment, and the information coming off of the system can now be shared with that legacy system, and it allows that farmer to not have to go through a whole transformation of how he or she's looking at their data, but it sort of allows you to have a mixed fleet, get the best product you need for that task and not have to worry or compromise the quality of that product or that service because of data. So now we've created that seamless connection for that farmer who maybe has a legacy system that he or she can now look at it and still use it, but can do all of their task planning that they need regardless of the color of tractor or plants or spray that they want to use.

And then Phase III and just incremental...

Yes. I mean what you'll see over time is more product and services being offered, better user interface, better efficiency of using the leveraging the data itself and becoming that as your primary repository as we start to rewire. So the first one was the single sign-on. We got that done faster. Now we've kind of created the common user interface, but you still sort of have historical pipes behind the scenes as we revamp with the Trimble Ag system, coupled with our Fendt One, coupled with other technologies we want to bring, it's sort of redoing it from the ground up in Phase III, offering for the farmers better, different -- better services, more services and hopefully a better user interface.

Great. And maybe we can touch on your third growth pillar as well, your parts growth strategy, it seems to be centered around this unique farmer core strategy. So it would be great to hear about that. I've certainly heard good feedback from your farmers and dealers on that, how that's going. So yes, I mean, we would love to hear more about the strategy and just adoption and feedback you're seeing from the dealers and customers as well.

Yes. So as part of our 3 growth pillars, we touched on PTx, we may talk about Fendt North and South American market share growth. Parts is the third growth pillar, growing from around $1.9 billion last year up to around $2.3 billion by 2029. A lot of that is done by 2 things. One is parts and service fill rate. So AGCO by third-party standards has the highest fill rates here in North America and in Europe. So that's a critical part because when that farmer makes the call to the dealer, does he or she have it? And when the dealer makes a call, does AGCO have it? So we have the highest fill rates in parts and service, which is important to us. What we do, which is unique and different than the industry is we brought in over the last year, FarmerCore. And FarmerCore is doing a lot more of the service on the farm versus the historical brick-and-mortar models. And so if you think about what that does, there's sort of a triple win in many ways because for the dealer, as we're rolling Fendt out in North and South America, we're able to show the dealer the cost benefit from an absorption standpoint of having a smaller brick-and-mortar store and then leveraging these mobile trucks to do a lot more of the service on the farm. And what it does for the dealer is it reduces their investment upfront. So they're not building these big giant stores with 12 days. They have a much smaller service center, but they're putting mobile trucks out in the field so their white space of what they're covering is bigger. And for AGCO, who's rolling out our dealership network, we're not dealing with conflicting dealers right now. We're able to cover more white space with that one dealer. So he or she's able to shift those trucks where they need to be covering more geography, lower upfront investment for them. So much better from an absorption standpoint for the dealers. For the farmer, it's like Amazon now. Instead of going to the mall the way many of us grew up, the dealers coming to you like Amazon, doing the work on the farm. And with our FarmerCore, our dealers are doing over 85% of the service on the farm. So much more convenient for the farmer. He or she is able to schedule it when they need it. A lot of times, they get other work done because you've got a technician on the farm and maybe they were there to do the service interval on the tractors. But if you need your planter seals change, that technician can do that as well. So the farmers are getting a lot more service done in the time that they want it done. So we're seeing a lot of receptivity to that. And I think that's part of what's driving this market share growth that we're seeing in North America because we look at all the different things we're doing on the products, then you layer on how we're servicing the farmer with better dealer sort of relationships and how we're helping them, we're seeing significant growth. So big opportunity here in North America, also in South America. Europe, where we have a fairly mature dealer network. I would say that's probably a little bit longer term as we start to think about rolling FarmerCore out there, but definitely big opportunities here for us in North America and South America. And again, because we don't have that legacy dealerships the way maybe others do, our dealers are able to cover more white space with these mobile trucks without sort of overlapping one of their other stores or a competitor store.

Great. Maybe we can touch on the -- what's, I think, the second growth pillar is Fendt market penetration globally too. Just talk about how that's gone so far, what inning we're in now, what the key opportunities are left for Fendt for further penetration?

Yes. So if I think about Fendt, it is our premium brand, best of the best and obviously, they've done exceptionally well in Europe and continue the team -- the Fendt European team has done incredibly well, continuing to gain share even last year, continuing to deliver profitability, new product introductions last year with the new 800, they continue to excel. Even in Europe where they already have a very strong presence and continuing to deliver strong profitability, the team there continues to execute incredibly well for us and very appreciative of what they've done. The opportunity, though, is more in North and South America, where we're still a relatively new entrant with that premium product in these 2 markets. And when I look at North America and you look at these farms about AGCO wanting to grow and you look at the Fendt products, performance-wise, they're, in many ways, better than the competition. I look at the Fendt tractors and the fuel efficiency of these tractors, depending on your use are anywhere from 10% to 20% more fuel efficient. So if you're a farmer who's especially a high-use farmer like an onion farmer who's using the tractor a lot, if you're getting 10% to 20% fuel efficiency, that's meaningful. When you look at the Momentum Planter, doing the infield adjustments, talking about maximizing your yield, the product quality and the product technology in many ways is better than what the competitor. So we've got -- for that farmer who's looking at making a switch, you got better technology, better product performance. You then look at the parts and service fill rate, AGCO has the best parts and service fill rate in North America -- North America and Europe for sure. So if that machine goes down, you've got the best fill rate. You then layer on farmer core that says that dealer is going to be on your farm doing the work for you versus you having to take that big tractor to the dealership. So better parts and service, better FarmerCore on-farm delivery, better product. The last piece that we were missing to a certain degree was that data. So that farmer may have loved the product quality, the product technology or the warranty, sorry, 3-year bumper to bumper warranty for us, what we call Gold Star. Industry is usually at 2. So you're a farmer, you got a Fendt tractor that has 10%, 20% better fuel efficiency, best parts and service in the industry, 3-year warranty versus a 2-year in the competitors, farmers, dealers doing your work on the farm, all of that feels great. Now I got this data piece. Well, if I like my Fendt tractor, but I can't integrate it with my legacy products, FarmENGAGE has now taken that off the table. So when we put all that together, we're very excited. And I think a lot of that's what's helped us deliver the market share growth that we saw in North America. All of those things coming together to really help the farmers give them an alternative to deliver high-quality products to them and ultimately hopefully improve their bottom line.

That's a good segue into my next question. You did call out that 2025, you turned in the highest global market share in AGCO's history. Maybe what do you think you can attribute to the market share gain? Yes, I mean, how much more room do you see in front of you to continue to gain share, especially in North America and South America?

Yes. I don't think there's one thing that we did different. I mean we talk about being the most farmer-focused company in the industry. And I think that goes a long way on trying to introduce technologies that help farmers become more profitable. Again, I look at what our teams in Europe have done with the awards they're winning at AGRITECHNICA. I look at the AE50 awards here in the U.S. and the number of awards that we're winning. It shows that we're innovating, and we're innovating in ways, I think, that are driving better performance and better profitability for the farmers, and you're seeing that in the market share gains that we're seeing in many parts of the world. I'd also look at it and I sort of layer in some of the other things that we're doing different than the others in the industry. And we've delivered the highest Net Promoter Score ever in our company last year. So despite the industry being down, we saw the highest level of Net Promoter Score. Now part of that is the equipment, but part of it is also what we're doing to make sure that when the farmer receives his or her equipment, they're going through the right training. They're getting the right education on what these machines can do for them. We're making sure that our dealer understands what they need to do either on the initial handoff and delivery with the follow-ups, leveraging farmer core, leveraging the connected machines, all the information. And so when we look at what we would call the fundamentals of how we prepare the equipment, the dealer, the farmer, we're seeing significant improvements with that as well. And so when you put these little pieces together, probably not one of them in isolation is making the difference, but between FarmerCore, how we're preparing the dealers with that Net Promoter Score being the highest it is, quality of our products, the innovation of our products coming together, all of that's delivering a very strong value proposition, delivered great results to us relative to -- from a performance standpoint last year relative to where we were last time in the industry at that point. And it gives us a lot of confidence as we go into this year to continue the momentum.

In your 2026 guide, you do assume 2% to 3% price realization, which is a bit more than some of your competitors. I guess what gives you confidence that you can achieve that pricing while also gaining share and work down dealer inventories?

Yes. Well, we did that in the fourth quarter. So our pricing was a lot better than what I had expected it to be. Our dealer inventories came down in most parts of the world, and we gained share. So we've got some strong -- the value proposition of the products that we're offering are definitely showed through in Q4. I look at that 2% to 3%. We have just over 1% carryover pricing going into 2026. And so as I look at around the world of what we have, the new products we're introducing, the value of the brands and sort of the stability of what we saw in the fourth quarter, we feel comfortable with that range. Obviously, it's a dynamic environment. We have 2 great competitors out there who have given their outlooks for pricing as well. And part of this when you talk to a farmer, it's the products performance. It's the whole perspective of what he or she is getting when they look at a Fendt tractor or a Massey tractor, but it's also a relative game. And so we've got to make sure that we're staying competitive and that we want that price point of our Fendt product relative to the competitors to be in the right range. And so depending on how the environment shapes out, we'll stay nimble on that. But overall, we feel good with our outlook right now for the 2% to 3%.

Great. And in Brazil, it did sound like last year, there was some pricing competition. Has that largely subsided? And maybe a higher-level question on Brazil. Just how do you think AGCO is competitively positioned? And what are the opportunities you see in that market long term?

Yes. So I think right now, that market is by far the most challenging from a volatility standpoint. I mean it's been the most volatile market since I started 30 years ago in industrial companies, and it will probably be the most volatile when I retire at some point. But it started the year last year with a strong mid-cycle and low horsepower segments related to coffee, citrus, dairy areas. High horsepower large ag really didn't gain traction last year. There was so much uncertainty on the political trade dynamics we see in the U.S. and China. Commodity prices have stayed low. So we really haven't seen the large ag part of the market pick up. Going to the back half of last year, tariffs on orange juice, tariffs on coffee really started to compress that market. Those have sort of been addressed here. When we look forward here, there's still a lot of uncertainty. Interest rates are still very high in South America, which is a big influencer because they don't have the level of subsidies that you see in Europe. They don't have the level of subsidies even that you see here in the U.S. So interest rates are continuing to be an issue for them. Commodity prices continue to be challenging for them. And a lot of that is creating a lot of uncertainty. So we definitely see that market to be challenged here in the first half of the year. Now when you move into the back half, our outlook had assumed that there would be some sort of a stimulus related to the presidential election. If we look back in history, generally in an election year, there's some sort of stimulus, whether that's in the form of lower rates or more money through [indiscernible] or other things that they do. We do hope that there's some sort of stimulus that comes in the back half of the year that helps pick up the Brazilian economy. So we'll see. Our outlook is relatively modest, generally speaking. The competitors are a little bit worse. But again, I think it depends on how you assume the back half and the election is probably the difference between us and the other 2. When I think about AGCO though longer term, that Cerrado region, the Mato Grosso is ideal for Fendt. So you are looking at these huge farms up there, professional growers with hundreds of thousands of hectares that are doing 2 to 3 plantings per year. So you go back to that fuel efficiency example I gave you with Fendt. If you're running those tractors 2x or 3x what maybe a North American farmer is doing with that level of fuel efficiency or if you look at that Momentum Planter with the hinge frame and you think about the topography up in the Cerrado region, that being able to manage the topography doing the infield adjustments, these professional growers are looking for maximum ROI and they're big and they're willing to invest if they see that, and that's where Fendt fits in exceptionally well. So we're growing there. We're rolling out our dealer network there. We're still at around 80%, maybe 85% of the white space covered from a dealer rollout, but that's where FarmerCore can come into play, getting on those mega farms more remotely for them versus having them to come into the shop. So we see a lot of opportunity. It just so happens that market right now is very challenged in that Cerrado region with the large ag farmers, but tremendous potential to grow share, especially Fendt.

Got it. This is a good stopping point if there's any questions from the audience. All right. We can keep going on. You sounded most confident about Western Europe market, that market growing in 2026 versus some of the other major markets. Just maybe what's informing your bullish view? Maybe bullish is a little too strong, but just what's informing that view on the market in 2026? And what are you hearing and seeing from customers?

Yes. I'm not sure I would use the term bullish. It's all relative. We have -- I think we have our European -- our Western European markets up 0% to 5%. But I guess it's all relative to the other 2. There's a couple of things going on. When you look at the European market, first, fundamentally, it's the most stable market because, generally speaking, Western European farmers around 50% of their income comes from government subsidies. That's continuing. And so you generally see a much better stable order pattern. You have better crop diversity in Europe than what you see in the other major markets. And as we look at the profitability in 2025, overall, dairy livestock farmers did fairly well. Grain farmers did okay, and that usually lends to better purchasing in 2026. And when we look at the age of the equipment, it's starting to bump up to the higher level of when we look at the prior downturn. So the age of the equipment is up. The CEMA index, which is that barometer of health is still in the growth category. It hasn't really moved much. It's sort of been in the same quadrant for the last 15 months or so, but it's still in that growth category. So the backdrop lends itself to a solid environment. When I look at our dealer inventory, we're sitting at 4 months, so right where we want it to be. So we're not having to stock up or destock. So you're not going to see those sort of variable swings like we are in some of the other markets. And I looked at our order board, we finished the year with 3 months of orders. So not too far off where we normally are. So we had a great fourth quarter. I said on the call, volumes exceeded my expectations. So we didn't pull ahead any sales there. I'm still sitting with 3 months of orders. I'm still sitting with 4 months of the dealer inventory. But overall, the macro backdrop, coupled with what's unique to us in dealer and order boards feels good, and we feel confident in maintaining the margins in Europe and hopefully seeing the industry grow in that low single digit this year.

Great. And you mean margins, in particular, have held up really well, which is good to see. Just how should we think about further runway for margin expansion from here from that 15% that you're guiding for roughly in 2026?

Yes. Again, I think it's a credit to the team in Europe have done an exceptionally good job in introducing new products, gaining share and staying diligent on overall pricing. And Europe had a great year last year, both -- Fendt, Massey and Valtra, all 3 of them did exceptionally well. As I look forward into '26, I think it's more of another year of stability. I don't see -- given the environment, again, we have our industry up sort of 0% to 5%. We talked about pricing being likely a challenging environment, even though we're guiding to this 2% to 3%. We know it's a competitive environment. So when I look at that and I look at sort of the opportunities for a little bit higher production, we still feel good about the mid-cycle -- or we still feel good about the margins being right around that 15%. I think a little bit will be geographic mix, a little bit of be product mix. Fendt did well last year. If Massey and Valtra performed a little bit better than Fendt, that has a little bit of a negative mix to us. And then if you look at the regional mix, Eastern Europe versus Western Europe, again, our outlook is a Western Europe. But if you see a country like Turkey outpace the growth, that has a little bit of a negative mix to us as well. So when we put it all together, sort of how we got comfortable with the team sort of still doing well this year, but the net margins being relatively flat.

Got it. And beyond 2026, just opportunities to drive further margin expansion there?

Well, again, we're always -- again, I don't want to -- the team is always looking to grow margins. I mean, that's sort of -- we want to grow market share, profitable market share. We want to grow our margins, and we want to enhance the value of what we bring to the farmers on the farm. And I think if you look at PTx, it doesn't have a real strong part of the business. For PTx, Europe is not a real strong part of the business yet. There's huge opportunities as those farmers are looking for productivity. If you look about some of the technologies that we're offering like [Aero-Tube], the targeted spring, which is obviously going to be very critical in Europe, big opportunities to grow the PTx part of the portfolio there. Now how big does it have to get to become a big difference in our European portfolio? I think that's the -- you're talking about a business that's just under $7 billion in revenue. So it's fairly sizable. So if PTx grows 3x, it will help, but it's not going to move the margins massively, even though it's a really high-margin, high-growth business, but it's just such a big part of our AGCO portfolio there that, that growth is -- may get a little bit overshadowed by the equipment sales right now.

Yes. Makes sense. And then I guess, when does North America return to profitability? And just what are you seeing in that market in particular?

Yes. I mean that market continues to be very challenged. We've seen it the last couple of years. I think all 3 of the major players have the large ag market being down again fairly significantly. When we talk as a company, what we say is our percentage of mid-cycle as a company, we were around 85%, 86% last year. If I was to look at it by region, North America last year was around 78% of mid-cycle. And this year, they're probably closer to 74% of mid-cycle. So a significantly challenged environment. We're underproducing to retail demand in our U.S. factories, trying to rightsize that dealer inventory. So you're going to deal with some underproduction likely here in the first half of the year. To get to profitability, what I would have told you pre-tariffs, we probably needed to be around $2 billion in revenue to get to be profitable. I think with the tariff environment that we have right now and the cost that we're incurring for some of the products that we're bringing in from overseas, we probably need to see revenues sort of in those low 2s to be able to get to more of a breakeven profitable business. And timing of that, we'll see. I think all of us publicly have said that we think that this is the -- at least in North America, the trough year. And hopefully, next year, we start to see a recovery. All of our data analytics, all of our models are showing that. But net farm income will be challenging this year. We know that here in North America. Obviously, there are some of the subsidies coming in, I think, hitting the farmers' bank accounts later on this year. Generally, we don't see that spur new equipment. Generally, that's paying down debt, buying the things that have to buy, seeds, maybe some fertilizer or herbicides, not necessarily going to lend itself to new equipment purchases, but we'll see how the demand from China plays out for soybeans and how the overall macro environment plays out for farmers this year. But we definitely see this being our most challenged market around the world. But hopefully, we'll see things start to improve in the back half of the year and into next.

And I am curious in North America or U.S. in particular, just do you think that there's anything in the pipeline that the U.S. government could potentially do to help farmer income, grain demand? Yes, I'm curious just what's the latest going on in D.C. that you guys are paying attention to?

Yes. Well, I think there's things that they can do. Trade is the biggest one. The more stability that the farmers have in who's going to buy the green, I think gives them the highest level of confidence to reinvest back into their business and new equipment. So trade is a big thing. If that can help drive the pricing, that's the second thing that helps improve their net farm income. And then there's the third of what they've been doing on the subsidies. But again, I think the subsidies because they're temporary, they don't have confidence that they're reoccurring, they're going to try to focus that on things that they have to spend on, debt repayment, securing things like seeds. That's likely not because you don't know if it's going to be there next year. You're not likely going to roll that into a large piece of equipment purchase. So I would say, let's focus more on the trade dynamics and try to get as much demand for U.S. farmer grain as possible because that will help build a stable base for them to feel confident to reinvest and upgrade their equipment on.

All right. Great. Well, we'll leave it there. It looks like we're up on time. Thanks for joining us, Damon and Greg.

Thank you.

Thank you.