2 Agricultural Equipment Stocks With More Than 25% Upside Potential

The agriculture sector has witnessed a resurgence in recent years, driven by higher commodity prices amid supply chain snags. While U.S. agricultural exports are cooling from the record levels reached in 2022, the agriculture market is projected to reach $3.90 trillion in gross production value this year, expanding at a 5.7% CAGR to $4.86 trillion by 2028.

Concurrently, the agricultural equipment market is witnessing meaningful technology integration - including Internet of Things (IoT), artificial intelligence (AI), and machine learning. This presents promising prospects for sector expansion.

While you may be familiar with industry heavyweights like Caterpillar (CAT) and Deere (DE), there are a couple other, more overlooked agricultural equipment stocks that analysts recommend. Here's a closer look at these two names, and what Wall Street's price predictions.

Stock #1. AGCO Corporation

AGCO Corporation (AGCO) is a big-time global manufacturer of tractors, combines, grain storage equipment and other agriculture tech that helps farmers be more productive and profitable. They distribute their equipment through independent dealers in over 140 countries worldwide.

AGCO stock is off about 13% over the past year, giving investors the opportunity to buy on the dip.

AGCO fell short of consensus estimates in their latest quarterly report on Feb. 6, posting adjusted Q4 2023 net income of $3.78 per share on revenue of $3.8 billion. Going forward, Wall Street thinks AGCO will return to annual profit and revenue growth in fiscal 2026.

For income-focused investors, AGCO offers shareholders a quarterly dividend payment $0.29 for a forward yield of 0.99% at current levels. That's backed by a decade of dividend growth and a low payout ratio of only 7%.

Plus, AGCO is priced at just 6.85x cash flow, which is a significant discount to its own five-year average, as well as its industrial sector peers. 

Analysts rate AGCO stock a “Moderate Buy” on average, based on 13 recommendations. This includes 8 “Strong Buy” ratings and 5 “Hold” ratings. The average analyst price target is $144.36, which represents a potential upside of 25.5%.

Stock #2: CNH Industrial

CNH Industrial (CNHI) is also a global manufacturer of tractors, trucks, buses, and other heavy equipment for farming and construction. They sell this equipment under brands like Case IH, New Holland, IVECO, and Steyr in markets across the world.

The stock has dropped by nearly a quarter over the past 52 weeks, but it's off its lows, up more than 23% since last November. 

The company's performance in the third quarter of 2023 came in a little light, with diluted EPS of $0.42 and revenue of $5.99 billion both missing Wall Street's targets. During the quarter, CNHI cut production of lower horsepower tractors in South America by 20% in response to slower sales. 

Looking ahead, CNHI is set to announce Q4 2023 earnings on Feb. 14 before the stock market opens, which means there's some short-term event risk coming up. Analysts predict the company will post EPS of $0.41 for the quarter.

Meanwhile, income investors should note that CNHI pays out an annual dividend of $0.40, yielding 3.26% at current levels. The payout ratio is a modest 23%, leaving room for growth.

At 7.30x forward cash flow and 7.11x forward adjusted EPS, CNHI is priced at a discount at current levels - compared to both its own historical averages and its peers in the industry.

The consensus analyst rating on CNHI stock lands at “Moderate Buy,” based on input from 17 experts. That includes 8 “Strong Buy” and 9 “Hold” recommendations. The average analyst price target stands at $15.52, implying upside potential of 28.4% from current levels.