Company Reports

Kubota continues to strengthen its premium compact farm and construction equipment offerings for small-scale agriculture, landscaping, and residential markets. In its largest market by sales, North America, the company remains a leader in subcompact tractors (under 40 horsepower), having established its first overseas distribution company there in 1972. As demand for small (sub-40 horsepower) models peaks, Kubota is shifting focus to midsize (40–100 horsepower) tractors, supported by new M5 and M6 models and a strong dealer network. In construction, it has led the global mini-excavator market for nearly two decades and holds the second-largest share in North America’s compact track loader market. In Asia, Kubota remains dominant in rice farming equipment, with leading shares in tractors and crawler combine harvesters across Japan and the Association of Southeast Asian Nations. We believe Kubota’s compact machinery expertise, brand strength, and dealer reach support its long-term growth.

Kubota's June-quarter revenue and operating profit rose 19% and 69% year on year to JPY 880 billion and JPY 138 billion, respectively. It raised full-year operating profit guidance to JPY 400 billion from JPY 300 billion. Shares traded 3% below the preresult level.

Kubota's March-quarter sales were JPY 810 billion, up 14% year on year, with farm and industrial machinery sales rising 15%. Operating margin rose to 12.1% from 8.6% a year ago, while margin excluding foreign exchange was 9.1%. Shares rose 7% intraday.

Kubota continues to strengthen its premium compact farm and construction equipment offerings for small-scale agriculture, landscaping, and residential markets. In its largest market by sales, North America, the company remains a leader in subcompact tractors (under 40 horsepower), having established its first overseas distribution company there in 1972. As demand for sub-40 horsepower models peaks, Kubota is shifting focus to midsize (40–100 horsepower) tractors, supported by new M5 and M6 models and a strong dealer network. In construction, it has led the global mini-excavator market for nearly two decades and holds the second-largest share in North America’s compact track loader market. In Asia, Kubota remains dominant in rice farming equipment, with leading shares in tractors and crawler combine harvesters across Japan and the Association of Southeast Asian Nations. We believe Kubota’s compact machinery expertise, brand strength, and dealer reach support its long-term growth.

Kubota continues to strengthen its premium compact farm and construction equipment offerings for small-scale agriculture, landscaping, and residential markets. In its largest market by sales, North America, the company remains a leader in subcompact tractors (under 40 horsepower), having established its first overseas distribution company there in 1972. As demand for sub-40 horsepower models peaks, Kubota is shifting focus to midsize (40–100 horsepower) tractors, supported by new M5 and M6 models and a strong dealer network. In construction, it has led the global mini-excavator market for nearly two decades and holds the second-largest share in North America’s compact track loader market. In Asia, Kubota remains dominant in rice farming equipment, with leading shares in tractors and crawler combine harvesters across Japan and the Association of Southeast Asian Nations. We believe Kubota’s compact machinery expertise, brand strength, and dealer reach support its long-term growth.

Kubota posted record December-quarter sales of JPY 814 billion, with Japan, North America, and Europe up 15%, 17%, and 18% year over year, respectively. Its new midterm plan targets a 12% operating margin by 2030 (compared with the current 9% level), and JPY 900 billion cumulative free cash flow.

Kubota posted September-quarter sales and operating profit growth of 7.3% and 5.3%, respectively, marking the first positive gains in the past five quarters. The company maintained its 2025 guidance. The share price rose 8% after the announcement.

Kubota continues to strengthen its premium compact farm and construction equipment offerings for small-scale agriculture, landscaping, and residential markets. In its largest market by sales, North America, the company remains a leader in subcompact tractors (under 40 horsepower), having established its first overseas distribution company there in 1972. As demand for sub-40 horsepower models peaks, Kubota is shifting focus to midsize (40–100 horsepower) tractors, supported by new M5 and M6 models and a strong dealer network. In construction, it has led the global mini-excavator market for nearly two decades and holds the second-largest share in North America’s compact track loader market. In Asia, Kubota remains dominant in rice farming equipment, with leading shares in tractors and crawler combine harvesters across Japan and the Association of Southeast Asian Nations. We believe Kubota’s compact machinery expertise, brand strength, and dealer reach support its long-term growth.

Kubota reported a weak June quarter with sales and operating profit declining 7.7% and 22.0% year on year, reflecting subdued North American tractor demand. The company revised fiscal 2025 (ending December 2025) sales and operating profit guidance down by 5.6% and 21.4%.

Kubota continues to strengthen its premium compact farm and construction equipment offerings for small-scale agriculture, landscaping, and residential markets. In its largest market by sales, North America, the company remains a leader in subcompact tractors (under 40 horsepower), having established its first overseas distribution company there in 1972. As demand for sub-40 horsepower models peaks, Kubota is shifting focus to midsize (40–100 horsepower) tractors, supported by new M5 and M6 models and a strong dealer network. In construction, it has led the global mini-excavator market for nearly two decades and holds the second-largest share in North America’s compact track loader market. In Asia, Kubota remains dominant in rice farming equipment, with leading shares in tractors and crawler combine harvesters across Japan and the Association of Southeast Asian Nations. We believe Kubota’s compact machinery expertise, brand strength, and dealer reach support its long-term growth.

Kubota's March-quarter sales were down 8% year on year, with 8% growth in the domestic machinery business and a 13% decline in the overseas machinery business. The company maintained its sales growth guidance of 1.1% for fiscal 2025 (ending December 2025).

Kubota continues to strengthen its high-end compact farm and construction equipment offering for small agriculture and residential/lawn-mowing in its core markets. In its largest market by sales, North America, the company has established itself as the market leader and pioneer with subcompact tractors (under 40 horsepower) since forming its first overseas tractor distribution company in 1972. In Asia, the company utilizes its strength with rice farming machinery and has the leading tractor and crawler combine harvester shares in Japan and ASEAN regions. Further, on the construction side, the company has held the leading global share in mini-excavators for about two decades and has the second-highest share in compact track loaders in North America. We expect the company to utilize its developmental capability with small-size machinery, brand, and vast dealer network to capitalize on further demand.

Wide-moat Kubota’s December-quarter revenue of JPY 738 billion was up 5.7% sequentially, showing a gradual recovery, in line with our expectations. While Europe continued to be a drag with a 22.3% year-on-year decline, worse than our expectation of a 20.0% decline, the shortfall was offset by a better-than-expected recovery in the domestic and North American markets. Based on the solid results, we maintain our 2025 revenue forecast of JPY 3.17 trillion, up 5% from the previous year, and our JPY 2,900 fair value estimate. We believe the shares are undervalued, reflecting concerns that Kubota may have already hit the revenue ceiling. However, Kubota’s share in construction equipment will continue to grow in key markets such as North America and Asia, with its leading position in subcategories such as compact track loaders and mini backhoes.

Kubota continues to strengthen its high-end compact farm and construction equipment offering for small agriculture and residential/lawn-mowing in its core markets. In its largest market by sales, North America, the company has established itself as the market leader and pioneer with subcompact tractors (under 40 horsepower) since forming its first overseas tractor distribution company in 1972. In Asia, the company utilizes its strength with rice farming machinery and has the leading tractor and crawler combine harvester shares in Japan and ASEAN regions. Further, on the construction side, the company has held the leading global share in mini-excavators for about two decades and has the second-highest share in compact track loaders in North America. We expect the company to utilize its developmental capability with small-size machinery, brand, and vast dealer network to capitalize on further demand.

Kubota continues to strengthen its high-end compact farm and construction equipment offering for small agriculture and residential/lawn-mowing in its core markets. In its largest market by sales, North America, the company has established itself as the market leader and pioneer with subcompact tractors (under 40 horsepower) since forming its first overseas tractor distribution company in 1972. In Asia, the company utilizes its strength with rice farming machinery and has the leading tractor and crawler combine harvester shares in Japan and ASEAN regions. Further, on the construction side, the company has held the leading global share in mini-excavators for about two decades and has the second-highest share in compact track loaders in North America. We expect the company to utilize its developmental capability with small-size machinery, brand, and vast dealer network to capitalize on further demand.

Wide-moat Kubota’s September-quarter sales marked a 5.4% decline year on year, slightly below our estimate of a 3.4% decline due to ongoing inventory correction, especially in North America. We continue to project flat revenue growth for fiscal 2024 as inventory levels of tractors, especially midsize ones, will continue for at least for one more quarter. However, we forecast channel inventory levels to normalize by the end of this year and reiterate our 5% growth assumption for fiscal 2025 driven by new home sales and demand pickup in farming activity.

Although Kubota’s June-quarter sales were up 9% year on year, slightly above our previous estimate, as price rises and relatively resilient demand for construction machinery (mainly compact track loaders) in North America offset weak tractor sales in the region. We continue to project flat revenue growth for fiscal 2024 after weaker tractor/mini-excavator sales in North America/Europe and a stronger yen in the second half. However, we believe the market is overly concerned about sales in North America due to high dealer inventories of key products such as midsize tractors and mini-excavators. While we expect headwinds to persist for at least the next two quarters, we forecast channel inventory levels to normalize by the end of the year and project 5% revenue growth in fiscal 2025, driven by new home sales and a pickup in farming activity. We maintain our fair value estimate of JPY 2,900 and believe the company's shares are undervalued.

Kubota continues to strengthen its high-end compact farm and construction equipment offering for small agriculture and residential/lawn-mowing in its core markets. In its largest market by sales, North America, the company has established itself as the market leader and pioneer with subcompact tractors (under 40 horsepower) since forming its first overseas tractor distribution company in 1972. In Asia, the company utilizes its strength with rice farming machinery and has the leading tractor and crawler combine harvester shares in Japan and ASEAN regions. Further, on the construction side, the company has held the leading global share in mini-excavators for about two decades and has the second-highest share in compact track loaders in North America. We expect the company to utilize its developmental capability with small-size machinery, brand, and vast dealer network to capitalize on further demand.

Kubota’s March-quarter operating income, which remained flat year on year at JPY 103 billion, was well above our previous estimate as price raises mitigated the impact of declining sales/production volumes and capacity utilization did not weaken as much as we had expected. As our concerns about the company’s ability to raise prices for its agricultural machinery during headwinds have eased, we raise our fiscal 2024 operating income estimate to JPY 311 billion from JPY 288 billion, and accordingly revise our fair value estimate to JPY 2,900 from JPY 2,700. While we assume a 0.5-percentage-point operating margin decline year on year to 10.4% in 2024, we expect margins to improve over the medium term, driven not only by a production recovery of its mainstay compact tractors in 2025, but also further aftermarket parts sales as agricultural/landscaping activity picks up. Therefore, we believe Kubota’s shares are undervalued.

We leave our fair value estimate for Kubota unchanged at JPY 2,700. Despite the better-than-expected 2023 results, we continue to project 2024 revenue to be JPY 2.9 billion, implying a 2.6% year-on-year decline, which is largely in line with guidance and well above prepandemic levels. The mild revenue decline in 2024 is due to the macroeconomic headwinds, but we project a medium-term recovery of tractor sales from 2025. We believe the positive share price reaction suggests some of the concerns over a material top-line decline from the macroeconomic headwinds have eased. However, we believe its shares remain undervalued, as its medium-term prospects are underestimated by the market. We forecast a steady-state revenue CAGR of 4% between 2024 and 2028, driven by equipment upgrades and parts sales from maintenance, as farming/landscaping and residential construction activity pick up.