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AGCO Corporation’s (AGCO - Free Report) adjusted earnings improved significantly to 35 cents per share in first-quarter 2018, against a loss of 2 cents per share posted in first-quarter 2017. Earnings also surpassed the Zacks Consensus Estimate of 11 cents, by a wide margin of 218%.
Including restructuring and other infrequent expenses, the company reported earnings of 30 cents per share in the quarter compared to a loss of 13 cents per share reported in the prior-year quarter.
AGCO generated revenues of $2.01 billion, up around 23% from $1.63 billion recorded in the year-ago quarter. Additionally, revenues surpassed the Zacks Consensus Estimate of $1.85 billion. Excluding favorable currency-translation impact of approximately 9.4%, net sales climbed approximately 14% year over year.
AGCO Corporation Price, Consensus and EPS Surprise
Moreover, AGCO’s strong earnings and sales results are backed by improved market demand in North America and healthy industry conditions in Western Europe.
Operational Update
Cost of sales went up 22% to $1.58 billion from the year-earlier quarter. Gross profit came in at $428 million in the quarter, jumping around 30% from $330 million recorded in the year-earlier quarter. Gross margin came in at 21%, expanding 100 basis points (bps) year over year.
Selling, general and administrative expenses flared up 19% year over year to $264.6 million. Adjusted income from operations increased more than two-fold year over year to $56.4 million. Consequently, operating margin advanced 120 bps year over year to 2.8%.
Segment Performance
Sales at the North America segment increased around 31.4% year over year to $502.9 million in the first quarter. The segment reported operating income of $26.8 million, which increased significantly from $3 million in the year-ago quarter.
Sales at the South America segment dipped 18% year over year to $182 million. The segment reported operating loss of $16.6 million compared to earnings of $2.4 million posted in the year-earlier quarter.
The EAME (Europe/ Africa/ Middle East) segment’s sales came in at $1,163.7 million, up 30.4% from the year-ago quarter. EAME’s operating income surged 56% to $99 million from $63.5 million reported in the prior-year quarter.
Sales at the Asia/Pacific segment ascended around 22% year over year to $159 million from $130 million recorded a year ago. The segment reported income of $4.7 million, up a whopping 124% from the year-ago quarter.
Financial Update
AGCO reported cash and cash equivalents of $348 million at the end of the first quarter, down from $367.7 million at the end of 2017. The company used $361 million of cash in operating activities during the quarter compared with cash usage of $251 million recorded in the prior-year period.
Guidance
AGCO raised its net sales 2018 outlook to $9.3 billion from the previous view of $9.1 billion, backed by improved sales volumes, positive pricing, as well as acquisition and foreign currency-translation impact. The guidance reflects year-over-year growth of 12%. AGCO also raised its 2018 adjusted earnings per share guidance to around $3.70 from the previous outlook of around $3.50. It also anticipates gross and operating margins to improve from the 2017 levels, backed by the favorable impact of pricing and cost-reduction efforts, partially offset by elevated engineering expenses.
AGCO projects that industry retail tractor sales will increase moderately in 2018, as retail sales of small tractors will likely be year over year, while retail sales in the row crop segment are expected to improve. Further, the company anticipates that industry demand in Western Europe will be relatively flat with 2017, as the benefit of last year’s improved harvest will be partially offset by the impact of fragile economics in the dairy and livestock sector.
Furthermore, industry demand in South America is expected to improve in the second half of 2018, and remain relatively flat with the 2017 levels. Elevated retail sales in Brazil might be offset by lower sales in Argentina due to the impact of lower crop production on farm income. Moreover, AGCO remains optimistic about commodity prices, farm income, as well as growth in industry, which will drive its performance over the long term.
Share Price Performance
Over the past year, AGCO has significantly underperformed the industry with respect to price performance. The stock has lost around 4%, while the industry recorded growth of 18%.
Axon Enterprise has a long-term earnings growth rate of 25%. The stock has appreciated 67.5% in a year’s time.
Ashtead has a long-term earnings growth rate of 15%. The company’s shares have been up 33.5% during the past year.
DMC Global has a long-term earnings growth rate of 20%. Its shares have rallied 59% in the past year.
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AGCO Corp (AGCO) Beats on Q1 Earnings & Sales, Lifts View
AGCO Corporation’s (AGCO - Free Report) adjusted earnings improved significantly to 35 cents per share in first-quarter 2018, against a loss of 2 cents per share posted in first-quarter 2017. Earnings also surpassed the Zacks Consensus Estimate of 11 cents, by a wide margin of 218%.
Including restructuring and other infrequent expenses, the company reported earnings of 30 cents per share in the quarter compared to a loss of 13 cents per share reported in the prior-year quarter.
AGCO generated revenues of $2.01 billion, up around 23% from $1.63 billion recorded in the year-ago quarter. Additionally, revenues surpassed the Zacks Consensus Estimate of $1.85 billion. Excluding favorable currency-translation impact of approximately 9.4%, net sales climbed approximately 14% year over year.
AGCO Corporation Price, Consensus and EPS Surprise
AGCO Corporation Price, Consensus and EPS Surprise | AGCO Corporation Quote
Moreover, AGCO’s strong earnings and sales results are backed by improved market demand in North America and healthy industry conditions in Western Europe.
Operational Update
Cost of sales went up 22% to $1.58 billion from the year-earlier quarter. Gross profit came in at $428 million in the quarter, jumping around 30% from $330 million recorded in the year-earlier quarter. Gross margin came in at 21%, expanding 100 basis points (bps) year over year.
Selling, general and administrative expenses flared up 19% year over year to $264.6 million. Adjusted income from operations increased more than two-fold year over year to $56.4 million. Consequently, operating margin advanced 120 bps year over year to 2.8%.
Segment Performance
Sales at the North America segment increased around 31.4% year over year to $502.9 million in the first quarter. The segment reported operating income of $26.8 million, which increased significantly from $3 million in the year-ago quarter.
Sales at the South America segment dipped 18% year over year to $182 million. The segment reported operating loss of $16.6 million compared to earnings of $2.4 million posted in the year-earlier quarter.
The EAME (Europe/ Africa/ Middle East) segment’s sales came in at $1,163.7 million, up 30.4% from the year-ago quarter. EAME’s operating income surged 56% to $99 million from $63.5 million reported in the prior-year quarter.
Sales at the Asia/Pacific segment ascended around 22% year over year to $159 million from $130 million recorded a year ago. The segment reported income of $4.7 million, up a whopping 124% from the year-ago quarter.
Financial Update
AGCO reported cash and cash equivalents of $348 million at the end of the first quarter, down from $367.7 million at the end of 2017. The company used $361 million of cash in operating activities during the quarter compared with cash usage of $251 million recorded in the prior-year period.
Guidance
AGCO raised its net sales 2018 outlook to $9.3 billion from the previous view of $9.1 billion, backed by improved sales volumes, positive pricing, as well as acquisition and foreign currency-translation impact. The guidance reflects year-over-year growth of 12%. AGCO also raised its 2018 adjusted earnings per share guidance to around $3.70 from the previous outlook of around $3.50. It also anticipates gross and operating margins to improve from the 2017 levels, backed by the favorable impact of pricing and cost-reduction efforts, partially offset by elevated engineering expenses.
AGCO projects that industry retail tractor sales will increase moderately in 2018, as retail sales of small tractors will likely be year over year, while retail sales in the row crop segment are expected to improve. Further, the company anticipates that industry demand in Western Europe will be relatively flat with 2017, as the benefit of last year’s improved harvest will be partially offset by the impact of fragile economics in the dairy and livestock sector.
Furthermore, industry demand in South America is expected to improve in the second half of 2018, and remain relatively flat with the 2017 levels. Elevated retail sales in Brazil might be offset by lower sales in Argentina due to the impact of lower crop production on farm income. Moreover, AGCO remains optimistic about commodity prices, farm income, as well as growth in industry, which will drive its performance over the long term.
Share Price Performance
Over the past year, AGCO has significantly underperformed the industry with respect to price performance. The stock has lost around 4%, while the industry recorded growth of 18%.
Zacks Rank & Key Picks
AGCO currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the same sector include Axon Enterprise, Inc , Ashtead Group PLC (ASHTY - Free Report) and DMC Global Inc. (BOOM - Free Report) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Axon Enterprise has a long-term earnings growth rate of 25%. The stock has appreciated 67.5% in a year’s time.
Ashtead has a long-term earnings growth rate of 15%. The company’s shares have been up 33.5% during the past year.
DMC Global has a long-term earnings growth rate of 20%. Its shares have rallied 59% in the past year.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>