Shares of agriculture machinery manufacturer,
) slipped 1.39% as the company projected weak demand for 2014 due
to reduced farm income. The company guided lower earnings for
2014 as compared with 2013 in its fourth-quarter earnings call on
The company reported adjusted fourth-quarter 2013 earnings of
$1.40, up 41% from 99 cents in the year-ago quarter and ahead of
the Zacks Consensus Estimate of $1.33. Including one-time
earnings in the prior-year quarter, reported earnings of $1.40
were 35% higher than the fourth quarter 2012 GAAP earnings of
Revenues in the reported quarter increased 6% year over year
to $2.86 billion and surpassed the Zacks Consensus Estimate of
$2.83 billion. Excluding an unfavorable currency
translation impact of 0.3%, net revenue increased approximately
6.1%. The top-line growth was mainly driven by strong market
demand in Europe/Africa/Middle East and the Asia Pacific
Cost of sales increased 4% to $2.27 billion in the quarter
from $2.17 billion in the year-ago quarter. Gross profit in the
reported quarter was $591 million, up 12% from $528 million in
the prior-year quarter. Consequently, gross margin expanded 120
basis points (bps) year over year to 20.7% in the quarter.
Selling, general and administrative expenses amounted to $295
million, up 4% from the year-ago quarter. Segment income from
operations increased 36% year over year to $209 million.
Consequently, operating margin expanded 160 bps to 7.3% from the
Sales in the North America segment rose 0.9% year over year to
$658 million in the quarter. The segment's income from operations
remained flat at $54 million in the quarter.
Sales in the South America segment went down 10% year over
year to $461.7 million in the reported quarter. Income from
operations for the segment decreased 36% year over year to $32.8
The EAME (Europe/ Africa/ Middle East) segment's sales were
$1,603 million, up 14% from the year-ago quarter. EAME operating
income grew 78% year over year to $155.2 million.
Sales in the Asia/Pacific segment rose 3.2% year over year to
$137 million from $132 million a year ago. The segment reported a
loss from operations of $1.6 million against the year-ago profit
of $0.4 million.
Record Sales & Earnings in 2013
Adjusted earnings per share increased 14% year over year to
$6.01 in 2013. Earnings not only came in ahead of the Zacks
Consensus Estimate of $5.94 per share but also edged past the
guidance of $6.00 per share. Including the effect of
one-time items in the prior fiscal, earnings increased 13% to
Revenues increased 8% year over year to $10.79 billion,
beating the Zacks Consensus Estimate of $10.77 billion. Excluding
unfavorable currency translation of approximately 1.2%, net sales
increased approximately 9.5% year over year.
At 2013 end, cash and temporary investments amounted to $1.05
billion versus $781.3 million at the end of 2012. Long-term debt
declined to $938 million from $1.03 billion at 2012 end.
Debt-to-capitalization ratio decreased to 24% at the end of 2013,
from 27% at th end of the prior year. Cash from operations in
2013 was $797 million compared with $666 million in the prior
AGCO cautioned that lower commodity prices in 2014 from 2013
levels will lead to reduced farm income and softer industry
demand across the developed agricultural equipment markets. AGCO
is projecting net sales in a range of $10.8 billion to $11.0
billion. Pricing benefits and market share improvements are
expected to compensate for the expected industry decline.
Benefits from higher gross margins will be offset by higher
engineering and market development costs. AGCO thus expects
full-year 2014 earnings per share of approximately $6.00.
Compared to the 2013 number of $6.01, projected earnings
represent a 0.2% year-over-year dip.
Among AGCO's peers,
Briggs & Stratton Corp.
) reported adjusted earnings of 5 cents per share, down 29% year
over year in the second-quarter fiscal 2014 (ended Dec 29, 2013).
The results also lagged the Zacks Consensus Estimate of 10
AGCO is set to benefit from strong free cash flow and a focus
on earnings growth. AGCO's strategic investments in production
facilities and higher technology products will improve
efficiency. The company is expanding its business in
international markets. Yet, 2014 will be a challenging year for
the company given the decline in demand expected in most of its
Duluth, Georgia-based AGCO is a global leader in the
designing, manufacturing 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 has a short-term Zacks Rank #3 (Hold). Some
better-ranked stocks in the machinery sector include
Manitowoc Company, Inc.
). While Manitowoc carries a Zacks Rank #1 (Strong Buy), Terex
has a Zacks Rank #2 (Buy).
AGCO CORP (AGCO): Free Stock Analysis Report
BRIGGS & STRATT (BGG): Free Stock Analysis
MANITOWOC INC (MTW): Free Stock Analysis
TEREX CORP (TEX): Free Stock Analysis Report
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