On Jul 2, 2014, Zacks Investment Research upgraded the
manufacturer of agricultural equipment
) to a Zacks Rank #1 (Strong Buy) based on potential acquisition
benefits, a strong cash position and growth in GSI sales in 2014.
Why the Upgrade?
AGCO remains committed to its plan of strategic investments in
production facilities and higher technology products. Based on
this, the company has agreed to acquire Intersystems Holdings Inc
on May 23. This will expand the company's material handling
The buyout will help AGCO to expand its grain handling and storage
business in the fast growing off-farm segment. The acquisition is
in sync with AGCO's acquisition, expansion and modernization plans
and matches perfectly with its GSI brand.
In the first quarter of 2014, GSI sales were up about 10% which
aided North America segment sales to rise 3.7% year over year to
$647.5 million in the quarter. However, AGCO's total sales
decreased 2.9% year over year to $2.33 billion in the quarter.
AGCO exited the quarter with cash and cash equivalents of $193.9
million as of Mar 31, 2014. AGCO expanded its share repurchase
program to $500 million, which is likely to be completed by mid
At the earnings call, AGCO reiterated its full-year 2014 earnings
per share outlook of approximately $6.00. Net sales guidance has
also been maintained in the range of $10.8-$11.0 billion.
Second-quarter 2014 earnings per share will be in the range of
$1.65 to $1.70.
The company projected GSI sales to be up approximately 10% for
full-year 2014 compared with 2013, with most of the growth
occurring outside the U.S. In addition, global population growth
and changing trends in diet are generating demand for additional
grain storage and protein production capacity facilitating growth
in the longer term.
These bullish factors led to an upward estimate revision. Over the
last 60 days, the Zacks Consensus Estimate for 2014 increased 0.5%
to $5.52 per share and for 2015, the same increased 3.8% to $5.24
Other Stocks to Consider
Some other stocks in the same sector that warrant a look include
AO Smith Corp.
). All these carry a Zacks Rank #1 (Strong Buy).
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