AGCO Corp. Beats, Ups Guidance - Analyst Blog


AGCO Corporation ( AGCO ) reported first quarter 2012 earnings of $1.21 per share, which exceeded the Zacks Consensus Estimate of 86 cents as well as the year-ago quarter's earnings of 81 cents.

Total revenue increased 26.5% year over year to $2.27 billion, beating the Zacks Consensus Estimate of $2.08 billion. Total revenue included an unfavorable currency translation impact of 4.3%, excluding which total revenue soared 30.8% in the quarter. The growth was mainly driven by an increase in sales across all the regions, particularly in Western and Eastern Europe and the acquisition of GSI.

The North American region reported a 57.6% improvement in sales to $566.5 million while in South America sales improved 1.2% to $415.4 million. In the EAME region sales improved 23.3% to $1,199.8 million, whereas Asia / Pacific region experienced a 67.9% improvement amounting to $92 million.

Cost and Margins

Cost of goods sold increased 23.5% to $1.78 billion in the quarter. Gross profit also rose 38.5% to $493 million. Consequently, gross margin jumped 190 basis-points (bps) to 21.7%.

Selling, general and administrative expenses increased 29.3% to $238.9 million in the quarter. Adjusted operating income increased 56.2% to $169.8 million. Operating margin soared 150 bps to 7.5%.

Financial Updates

Cash and cash equivalents were $426.7 million as of March 31, 2012, compared to $724.4 million as of December 31, 2011. Long-term debt excluding current portion amounted to $1,331.1 million as of March 31, 2012, compared to $1,409.7 million as of December 31, 2011. Debt-to-capitalization ratio improved to 30.5% as of March 31, 2012, compared to 32.9% as of December 31, 2011.   

Outlook for 2012

The company expects adjusted earnings of $5.50 per share for the year, up from the prior guidance of $5.00 per share. It has also upgraded its revenue estimates in the range of $10.2-$10.5 billion from the previous guidance of $10.0 billion. AGCO expects its worldwide industry sales for 2012 to grow reasonably compared to the previous year. Further, it expects growth in Western and Eastern Europe. It looks forward to strong market conditions in North as well as South America.

Our Take

AGCO Corp. continues to invest in its full product line of farm equipment with a view to expanding its current product offering. It has introduced more technological and localized complimentary products like sprayers for row customers in Brazil, high technology tractors like Fendt 700 Vario equipped with Selective Catalytic Reduction (SCR) engine technology in Europe and North America.  

Moreover, AGCO Corp. also continues with its strategy to expand in the emerging markets. The company wants to extend its businesses in the CIS region and establish local manufacturing abilities to take the advantage of growth opportunities in this region where immense tracts of farmland are being cultivated using inefficient machinery. In addition, it has plans to invest in production facilities in China over the next few years.

AGCO Corp. is a leading manufacturer and distributor of agricultural equipment and related replacement parts. It competes with companies like Deere & Company ( DE ) and CNH Global NV ( CNH ).

Currently, we have a long-term Outperform recommendation on AGCO Corp. The stock retains a short-term Zacks #1 Rank ("Strong Buy" rating).

AGCO CORP (AGCO): Free Stock Analysis Report
CNH GLOBAL NV (CNH): Free Stock Analysis Report

DEERE & CO (DE): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: AGCO , CNH , DE , SCR

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