Lower farm income is likely to cloud the near-term outlook for the Zacks Manufacturing - Farm Equipment industry. Nonetheless, the industry stands to gain over time from rising demand for agricultural equipment needed to support the food needs of a growing global population. Kubota, AGCO Corp., Alamo Group and Lindsay are poised to capitalize on this demand, backed by efforts to grow their product offerings.
Additionally, the push to transform agriculture through automation, precision and user-friendly technologies is set to be a growth catalyst. Deere, CNH Industrial and Kubota are ramping up investments to strengthen their technological capabilities.
About the Industry
The Zacks Manufacturing - Farm Equipment industry comprises companies that manufacture agricultural equipment. These equipment include tractors, combines, cotton pickers and harvesting equipment; tillage, seeding and application equipment, consisting of sprayers, nutrient management and soil preparation machinery; and hay and forage equipment, comprising self-propelled forage harvesters and attachments, balers and mowers.
Some companies in the industry produce turf and utility equipment, consisting of riding lawn equipment and walk-behind mowers, golf course equipment, utility vehicles, commercial mowing equipment, and garden tillers and snow throwers. Some participants manufacture irrigation equipment. Deere, Kubota and CNH Industrial are presently the top three global manufacturers of agricultural equipment (in that order).
Trends Shaping the Future of the Manufacturing - Farm Equipment Industry
Low Farm Income to Weigh on the Industry: The U.S. Department of Agriculture (USDA) forecasts a 0.7% year-over-year dip in net farm income to $153.4 billion in 2026. Total crop receipts are expected to inch up 1.2%, driven by higher corn and hay receipts. Wheat and rice receipts are expected to fall while soybean receipts are expected to be flat.
The increase in corn receipts will be mainly volume-driven. Wheat receipts are projected to fall on lower volumes and rice receipts will decline on lower prices and volumes. In inflation-adjusted terms, total crop receipts are predicted to fall 0.7%.
Meanwhile, total production expenses are expected to increase 1% with livestock/poultry purchases, feed and labor to be the three major expense categories. Pesticide, fuel and oil expenses are likely to decline, while property taxes, fees and electricity costs are expected to rise.
Direct government farm payments are expected to offer some relief, rising $13.8 billion from 2025 to $44.3 billion in 2026. With the overall farm income expected to decline, this will weigh on the near-term demand of the Manufacturing - Farm Equipment industry.
Demand for Food to Fuel the Industry: Global food demand is set to increase, driven by population growth and improving living standards. In the United States, the agricultural machinery market is expected to witness a CAGR of 2.38% over 2025-2031. Larger farm sizes and rising labor costs are accelerating the shift toward mechanization, while subsidies on farm equipment purchases are enabling even small-scale farmers to invest in machinery.
Pricing, Cost-Cutting Actions to Boost Margins: The industry continues to face cost inflation, labor shortages and tariff-related pressures on margins. In response, companies are implementing pricing actions and cost-cutting measures, which should help protect profitability.
Technologically Advanced Machinery Gaining Popularity: Customers are increasingly relying on advanced technology, smart farming solutions and mechanization to run their operations. Thus, the industry participants are enhancing investments in launching products equipped with advanced technologies and features to keep up with customers' evolving demands. Precision agriculture technology is expected to be a key catalyst, as it enables farmers to increase yield with reduced input costs and sustainability benefits.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Manufacturing - Farm Equipment industry is part of the broader Zacks Industrial Products sector. The industry currently carries a Zacks Industry Rank #159, which places it at the bottom 35% of 243 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dim prospects in the near term. Zacks research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Industry Versus Broader Market
The Zacks Manufacturing - Farm Equipment industry has underperformed its sector but outperformed the Zacks S&P 500 composite over the past 12 months. Stocks in this industry have gained 18.3% in the past 12 months compared with the S&P 500’s growth of 13.9%. The Industrial Products sector has gained 27% in the said time frame.
Industry's Current Valuation
On the basis of the trailing 12-month EV/EBITDA ratio, which is a commonly used multiple for valuing farm equipment stocks, we see that the industry is currently trading at 30.66X compared with the S&P 500’s 17.70X. The Industrial Products sector’s trailing 12-month EV/EBITDA is 21.66X.
Over the last five years, the industry traded as high as 30.99X and as low as 14.16X, the median being 19.84X.