AGCO Corporation

AGCO Corporation (AG) is operating in the very hot industry of farming machinery. The strength of demand can be seen in the companies most recent quarterly results, where net sales grew by 33% to $1.7 billion. The company's share price is currently perched upon a very nice level of support.

Full Analysis

AGCO manufactures and distributes agricultural equipment and related replacement parts worldwide. It distributes its products through a network of independent dealers and distributors. The company was founded in 1990 and is headquartered in Duluth, Georgia.

The company has no doubt benefited from the boom in the agricultural machinery industry that is being fueled by sky-rocketing prices in the commodities markets.

On Oct 30, AGCO reported an excellent quarter that was driven by an impressive 33% increase in sales. Net income for the period was $76.9 million on $1.6 billion in sales, compared with net income of $5.4 million on $1.2 billion in sales in the third quarter of 2006. Earnings were 80 cents per share, up from earnings of 6 cents from the same quarter last year.

Industry unit retail sales of tractors in South America increased 44%, while it grew 1% in North America and 5% in Europe. "Robust global farm equipment markets drove strong sales growth and improved operating results in all four of our geographic segments for the third quarter," said Martin Richenhagen, chairman, president and CEO of AGCO.

This marks the fourth consecutive quarter that the company has surprised and beaten analyst estimates, having done so by an average of 24 cents, or a whopping 247%. In addition, within the past 30 days two covering analysts have increased next-year projections, driving the consensus estimate to its current reading of $3.14.

All of the positive news is reflected in the company's stock price, which has had a banner year, at one point registering over a 50% gain at the 52-week high of over $71.

After topping off at this point, shares traded lower, but now appear to be in an excellent position to resume the upward trend. A very nice trend line that began from the low of Oct 22 is providing support and should continue to do so as prices look to reverse and once again move higher.

The stochastic is providing an excellent signal, indicating that shares are very close to trading in "oversold" territory, which is very unique for a stock that has logged these kinds of gains.