AGCO - Value


The agriculture equipment makers were on a roll in 2011 as farming income hit a record high. AGCO ( AGCO ) 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 just 8.8.

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 and Valtra.

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 earlier guidance.

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 designates value.

This is also much lower than that of the well known name in its industry Deere ( DE ). 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 value fundamentals.

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 @TraceyRyniec .

AGCO CORP ( AGCO ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Investing Ideas , Stocks

Referenced Stocks: AGCO , DE

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