The agriculture equipment makers were on a roll in 2011 as
farming income hit a record high.
) posted both record sales and earnings in 2011. This Zacks #1 Rank
(Strong Buy) is still expected to see double digit earnings growth
again in 2012. Yet it's also a value stock with a forward P/E of
AGCO is a Duluth, GA based maker of agriculture equipment. The
company sells in more than 140 countries through a team of
independent dealers and distributors.
The company has 4 core brands: Challenger, Fendt, Massey Ferguson
2012 Zacks Consensus Estimate Moves Higher
In the last 30 days, 1 estimate has been revised higher for 2012.
That has pushed the 2012 Zacks Consensus Estimate up to $5.08 from
$5.07 in that time.
That's earnings growth of 13.5% compared to 2011.
In February, AGCO provided 2012 guidance of about $5.00 per share.
Therefore, the analysts are a little hotter than the company's
In the fourth quarter report, the company was also bullish on 2012
citing favorable long term trends in farming, including growing
demand for protein and grain consumption, and farmers' income.
AGCO Beat Again in the Fourth Quarter
On Feb 7, AGCO reported its fourth quarter results and surprised on
the Zacks Consensus Estimate by 8.3%.
AGCO has a tremendous earnings surprise track record. It is one of
just a few companies that has surprised on the estimate every
quarter over the last 5 years.
This is even more impressive given that the Great Recession
occurred during that time and it was difficult for most companies
to manage earnings expectations.
Sales rose 16.1% in the fourth quarter to $2.5 billion from $2.2
billion a year ago. Sales for the full year, excluding favorable
currency translation of 5%, rose 22.2%, a new record.
Lots of Value
The agriculture stocks have been out of favor, even though they've
rebounded from 2011 lows.
There's still a lot of value in AGCO.
In addition to a low P/E which is under 10, the company also has a
price-to-book ratio of just 1.4. A P/B ratio under 3.0 usually
This is also much lower than that of the well known name in its
industry Deere (
). Deere has a P/B ratio of 4.7, well above that of a value stock.
Value investors also look at price-to-sales ratios to determine
value. AGCO's P/S ratio is just 0.5. A P/S ratio under 1.0 can mean
a company is undervalued.
AGCO is scheduled to report first quarter results on May 1.
Investors will get a much clearer picture how 2012 is stacking up
after the first quarter results.
But for now, 2012 estimates are up and the company still has solid
Tracey Ryniec is the Value Stock Strategist for
. She is also the Editor of the Turnaround Trader and Insider
Trader services. You can follow her on twitter at
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