We reiterate our Outperform recommendation on
), following its forecast-topping first-quarter 2012 results. The
company's first quarter earnings of $1.21 per share surpassed the
Zacks Consensus Estimate of 86 cents. Revenues increased 26.5% year
over year to $2.27 billion, beating the Zacks Consensus Estimate of
The company now expects adjusted earnings of $5.50 per share for
2012, up from the prior guidance of $5.00 per share. AGCO Corp. has
also raised its revenue estimates to the range of $10.2-$10.5
billion from the previous guidance of $10 billion. Moreover, the
company expects its worldwide industry sales to grow reasonably in
2012 compared to the previous year.
AGCO Corp. is a leading manufacturer and distributor of
agricultural equipment and related replacement parts. The company
offers a full product line of farm equipment through a wide network
of dealers and distributors in more than 140 countries across the
world.It competes with companies like
CNH Global NV
Deere & Company
The company completed the acquisition of GSI Holdings in the
second half of 2011. GSI Holdings is a leading manufacturer of
grain storage and protein production systems and serves its global
customer base through more than 500 independent dealers. It
produces grain storage and handling solutions for farmers as well
as large-scale grain processors. Its protein production product
line supports both swine and poultry growers.
Over the years, the diet preference of the emerging markets has
shifted towards protein consumption and, therefore, the demand for
grain storage as well as swine and poultry production has
increased. Thus, there remains ample scope for GSI Holdings to
obtain new orders for its products as the markets now prefer more
sophisticated technology. Therefore, GSI Holdings has extended AGCO
Corp.'s capabilities to the agricultural sector.
The U.S. Department of Agriculture has recently predicted that
corn crop in U.S.will be nearly 48 million tons in 2012, up 4.5
million tons year over year, and projected to be the largest crop
in the last 75 years. According to its report, worldwide corn
production is expected to rise 10% to 946 million tons this year.
So, the farmers are now on a buying spree of new tractors and other
agriculture equipment. As a result, demand for AGCO Corp.'s
agriculture equipment may increase in the coming days.
In addition, AGCO Corp. continues with the expansion of its
products line, with particular focus on a high horsepower range of
equipment. It has introduced more technologies and localized
products like sprayers in Brazil for row crop customers. Besides,
it has introduced high technology tractor products like Fendt 700
Vario and Challenger MT 600 which utilize the SCR engine
technology. Improved technology guarantees that these new models
can run efficiently with less fuel.
Our recommendation on AGCO Corp. is in line with a short-term
Zacks #1 Rank (Strong Buy).
AGCO CORP (AGCO): Free Stock Analysis Report
CNH GLOBAL NV (CNH): Free Stock Analysis Report
DEERE & CO (DE): Free Stock Analysis Report
KUBOTA CORP ADR (KUB): Free Stock Analysis
To read this article on Zacks.com click here.