On March 22, Zacks Investment Research downgraded
), a manufacturer of agricultural equipment, to a Zacks Rank #5
Why the Downgrade?
Shares of AGCO fell 1.39% after the company projected weak demand
outlook for 2014 in its fourth-quarter 2013 earnings call on Feb
4, due to reduced farm income.
Despite adjusted earnings in the fourth quarter improving 41%
year over year to $1.40, AGCO reiterated its full-year 2013
earnings per share guidance of $6.00, reflecting a 0.2%
year-over-year dip. 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 put pressure on
AGCO's earnings. In addition, the company anticipates the
benefits from higher gross margins to be offset by higher
engineering and market development costs.
Total unit production for AGCO increased about 5% in from 2012.
The company expects production volumes for the full year 2014 to
be flat as compared with 2013, with decline in higher horsepower
equipment balanced by increase in lower horsepower machines.
In addition, product demand is expected to deteriorate in the
near term due to fall in farm income and crop prices as well as a
less favorable renewable fuel standard (RFS). Notably, the RFS is
likely to pull down the demand of corn, thereby adversely
affecting the need for agricultural equipment as well.
Moreover, strong growth in South America and a modest performance
in North America are expected to be offset by a moderate decline
in Western Europe.
Other Stocks to Consider
Other machinery makers with a better Zacks Rank include
Alamo Group, Inc.
Altra Industrial Motion Corp.
). All of these have a Zacks Rank #2 (Buy).
AGCO CORP (AGCO): Free Stock Analysis Report
ALTRA HOLDINGS (AIMC): Free Stock Analysis
ALAMO GROUP INC (ALG): Free Stock Analysis
XYLEM INC (XYL): Free Stock Analysis Report
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