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AGCO Corporation (AGCO)

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We reiterate our Outperform recommendation on AGCO Corporation (AGCO) with a target price of $52. The company reported first quarter 2012 earnings of $1.21 per share, exceeding the Zacks Consensus Estimate of $0.86. Total revenues increased 26.5% to $2.27 billion, beating the Zacks Consensus Estimate of $2.08 billion.

The acquisition of GSI will help to place the company in a new market sector and extend its achievement in the agricultural industry. Moreover, it plans to invest in new products to expand its product line. In addition, its strategy of entering the emerging markets of Russia, CIS, China and Africa is slated to achieve significant growth.

Further, the demand for AGCO's products may increase as the U.S. Department of Agriculture expects worldwide corn production to rise 10% to 946 million tons in 2012. We set a 6-month target price of $52 per share, based on a P/E of 9.4x and our fiscal 2012 earnings estimate.

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