On Apr 3, 2014, we issued an updated research report on
). This manufacturer of agricultural equipment reported
fourth-quarter 2013 adjusted earnings of $1.40 per share, which
improved 41% year over year and came ahead of the Zacks Consensus
AGCO CORP (AGCO): Free Stock Analysis Report
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The company remains committed to its plans of expanding in the
Commonwealth of Independent States (CIS), China and Africa. Last
year, AGCO entered into a 50-50 joint venture (JV) with Russian
Machines to manufacture and distribute agricultural equipment and
replacement parts in Russia.
Further, the company plans to invest in production facilities in
China over the next 15 years. AGCO intends to widen its presence
in Africa and has $100 million of investment in pipeline for the
Additionally, the company's efforts to enhance shareholders'
value was evident when a 10% hike in the quarterly payout was
announced in Jan 2014. Moreover, AGCO increased its share
repurchase program to $500 million, which will likely be complete
over the next 18 months. The company will continue investing for
driving growth and profitability with additional investments in
plants and new products. It will also target another strong year
of solid free cash flow for 2014.
For 2014, AGCO expects GSI sales to be up 10%-15% from 2013, with
most of the growth occurring outside the U.S. The countercyclical
nature of the protein production sector supports more stable
earnings in GSI. In the long term, an increase in the world's
population and change in diet are expected to create demand for
additional grain storage and protein production capacity.
However, AGCO reiterated its full-year 2014 earnings per share
guidance of $6.00, which reflects a 0.2% year-over-year dip. The
company also cautioned that a fall in commodity prices in 2014 as
compared to 2013 will lead to reduced farm income and softer
industry demand across the developed agricultural equipment
markets. AGCO is projecting net sales in the range of $10.8
billion to $11.0 billion for 2014, relatively flat as compared
with 2013. The guidance includes the impact of softer market
In addition, product demand is expected to fall in the near term
due to decrease in farm income and crop prices as well as a less
favorable renewable fuel standard (RFS). Notably, the RFS is
likely to drag the demand for corn, thereby lowering the need for
agricultural equipment as well. The company also anticipates rise
in market development expenses and engineering expenditures (for
meeting Tier 4 final emission requirements) to continue weighing
Furthermore, the absence of an extension of current depreciation
tax benefits beyond 2013 (in the U.S.) and potential FINAME
borrowing cost increases (in Brazil) could pressure AGCO's
AGCO currently carries a Zacks Rank #4 (Sell).
Other Stocks to Consider
Some better-ranked machinery makers worth consideration include
Alamo Group, Inc.
Broadwind Energy, Inc.
Altra Industrial Motion Corp.
). All of these have a Zacks Rank #2 (Buy).