) fell 9% since the company reported its third-quarter 2013
earnings on Oct 29 and said that it expects global industry
demand to be flat in 2013. Even though earnings improved 32% to
$1.27 per share from the prior-year quarter, it missed the Zacks
Consensus Estimate of $1.29.
Revenues in the reported quarter increased 7.9% year over year to
$2.5 billion and was in line with the Zacks Consensus
Estimate. Excluding an unfavorable currency translation
impact of 1.8%, net revenue increased approximately 9.7%. The
top-line growth was mainly driven by strong market demand in
South America and the Asia Pacific region.
Cost of sales increased 6% to $1.9 billion in the third quarter
from $1.8 billion in the year-ago quarter. Gross profit in the
reported quarter was $556 million, up 13% compared with $491
million in the prior-year quarter. Consequently, gross margin
expanded 110 basis points (bps) year over year to 22.5% in the
Selling, general and administrative expenses amounted to $258
million, down 1.8% from the year-ago quarter. Segment income from
operations increased 43% year over year to $199 million.
Consequently, operating margin expanded 190 bps to 8% from the
segment's sales rose 9% year over year to $687 million in the
quarter led by increased sales of high horsepower tractors,
sprayers and implements. The segment's income from operations
improved 30% to $78 million from $60 million attributed to higher
sales, a favorable product mix and margin improvement
Sales in the
segment went up 19% year over year to $572 million in the
reported quarter, driven by increased sales in Brazil and
Argentina. Income from operations for the segment increased 60%
year over year to $71.9 million. Higher sales and the benefit of
cost reduction initiatives contributed to the year-over-year
(Europe/ Africa/ Middle East) segment's sales were $1,086
million, up 2% from the year-ago quarter. The EAME operating
income grew 20% year over year to $98.4 million.
Sales in the
segment rose 7% year over year to $130.6 million from $122.4
million. The segment reported a loss from operations of $2.6
million against the year-ago profit of $3.8 million.
As of Sep 30, 2013, cash and temporary investments amounted to
$620.5 million versus $781.3 million as of Dec 31, 2012. As of
Sep 30, 2013 long-term debt declined to $1.0 billion compared
with $1.03 billion as of Dec 31, 2012. Debt-to-capitalization
ratio decreased to 22% as of Sep 30, 2013, from 24% as of Dec 31,
Cash from operations for the nine-month period ended Sep 30,
2013, was $169 million, while cash used in operating activities
was $33.2 million in the year-ago comparable period.
AGCO reiterated its full-year 2013 earnings per share guidance of
$6.00. The company also maintained full-year revenue band of
$10.8-$11 billion. Strong growth in South America and modest
growth in North America is expected to be offset by modest
declines in Western Europe. Global industry demand is expected to
be relatively flat in 2013 compared to 2012.
AGCO also expects gross margin to improve in 2013 compared with
2012, but will be somewhat affected by increased market
development expenses, and higher engineering expenditures to meet
Tier 4 final emission requirements. The company also projects
capital expenditures to be in the $400-$425 million range and
free cash flow to be in the band of $200-$250 million.
AGCO will benefit from strong free cash flow and its focus on
earnings growth. The long-term outlook for the farming industry
is also compelling. AGCO's continuous focus on strategic
investments in production facilities and higher technology
products will improve efficiency.
The company remains committed to plans of expanding its business
in international markets. In September, AGCO entered into a 50-50
joint venture to manufacture and distribute agricultural
equipment and replacement parts in Russia.
In late September, AGCO purchased Johnson System Inc., a
leader in structural steel manufacturing having a focus on the
agricultural industry. AGCO will benefit from Johnson System's
experience in the grain handling business and its full range of
reputed products and custom-design options that can meet the
unique and specific needs of any project.
AGCO CORP (AGCO): Free Stock Analysis Report
ALAMO GROUP INC (ALG): Free Stock Analysis
BRIGGS & STRATT (BGG): Free Stock Analysis
DEERE & CO (DE): Free Stock Analysis
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Duluth, GA-based AGCO is a global leader involved in the design,
manufacture and distribution of agricultural machinery. AGCO
supports productive farming through a wide range of tractors,
combines, hay tools, sprayers, forage equipment, tillage,
implements, grain storage and protein production systems, and
other related replacement parts.
AGCO currently retains a short-term Zacks Rank #2 (Buy).
Deere & Co
) also belongs to the machinery and farming industry and holds a
Zacks Rank #2 (Buy).
Among AGCO's peers,
Briggs & Stratton Corp.
) reported adjusted loss per share of 35 cents for first-quarter
fiscal 2014. This compares unfavorably with the Zacks Consensus
Estimate of loss per share of 31 cents and 28 cents loss in the
year-ago quarter. Another competitor,
Alamo Group, Inc.
) is expected to announce its third-quarter results on Nov 7. The
Zacks Consensus Estimate currently stands at 80 cents, reflecting
annual growth of 11.97%.