AGCO Corporation (AGCO) Cash Flow Statement

The OCF/NI ratio of 2.14x in 2026Q2 appears robust, but it is driven by a $416M working capital inflow, which may reverse. In contrast, 2026Q1 saw a -7.46x ratio due to a $521M working capital outflow, indicating that cash conversion is not stable. This volatility suggests that reported earnings are not consistently translating into cash, and investors should monitor the sustainability of working capital swings.

The FCF margin of 4.1% in 2026Q2 is a significant improvement from the -19.4% in 2026Q1, but it remains well below the 23.1% achieved in 2025Q4. This inconsistency suggests that the company is not generating stable free cash flow, likely due to cyclical demand and inventory adjustments. The gap between net income and FCF is notable, as 2026Q2 net income of $77M is lower than FCF of $108M, but this is reversed in other quarters, indicating that FCF is not a reliable indicator of underlying profitability.

The reduction in CapEx from $114M to $57M over six quarters, with CapEx/Revenue falling from 3.9% to 2.2%, suggests that management is scaling back investment amid the demand downturn. This could be prudent cost management, but it may also limit future growth opportunities. The low capital intensity relative to revenue indicates that AGCO is not heavily investing in new capacity, which may be appropriate given the cyclical weakness.

The working capital changes are highly erratic, with large outflows in Q1 quarters and inflows in Q4 quarters, suggesting a seasonal pattern. However, the magnitude of swings (over $500M) indicates that inventory and receivables management is not smooth, possibly due to demand fluctuations. This volatility makes operating cash flow unpredictable and may signal that the company is adjusting production to align with dealer demand, but it also raises questions about the efficiency of working capital management.

The $347M buyback in 2026Q2 is a notable departure from the prior quarter's zero buybacks, indicating that management may view the stock as undervalued or is seeking to offset dilution. However, this aggressive buyback comes at a time when free cash flow is only $108M, implying that the repurchase may be funded by existing cash or debt. This raises concerns about capital allocation discipline, especially given the cyclical downturn and the need to maintain liquidity.

The cumulative OCF of $1.43B versus net income of $433M implies that cash conversion has been strong on a cumulative basis, but this is largely due to working capital releases. However, the quarterly volatility suggests that this is not a stable trend. The divergence may also reflect non-cash charges like D&A and SBC, but the working capital swings are the dominant factor. Investors should be cautious about extrapolating this cumulative performance into the future, as it may reverse if working capital normalizes.