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Why Is Agco (AGCO) Up 6.3% Since Last Earnings Report?
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It has been about a month since the last earnings report for Agco (AGCO - Free Report) . Shares have added about 6.3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Agco due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
AGCO Corp's Q3 Earnings & Sales Top Estimates, View Up
AGCO delivered third-quarter 2020 adjusted earnings per share of $2.09, up a whopping 155% year over year. The reported figure beat the Zacks Consensus Estimate of $1.02 per share. The company’s quarterly results reflect sales growth and margin expansion across all segments.
Revenues increased 18.4% year over year to $2,498 million during the September-end quarter. The top-line figure also beat the Zacks Consensus Estimate of $2,159 million. Excluding the unfavorable currency-translation impact of 1.6%, net sales increased 20% year over year.
Operational Update
Cost of sales grew 15.6% year over year to $1,919 million in the third quarter. Gross profit was up 28.6% year over year to $579 million during the reported quarter. Gross margin came in at 23.2% compared with the prior-year period’s 21.3%.
Selling, general and administrative expenses flared up to $251 million from the year-ago quarter’s $245 million. Adjusted income from operations surged 110% year over year to $225 million. Consequently, operating margin came in at 9% compared with the year-earlier quarter’s 5%.
Segment Performance
Sales in the North America segment were up 8.6% year over year to $582 million during the July-September period. The segment reported an operating income of $58 million compared with the prior-year quarter’s $33million.
Sales in the South America segment climbed 14.6% year over year to $274 million. The segment reported an operating profit of $16.7 million, as against the prior-year quarter’s operating loss of $5.6 million.
The EME (Europe/Middle East) segment’s sales came in at $1,406 million compared with the $1,146 million recorded in the year-ago period. The EME’s operating income jumped 54% year over year to $188 million.
Sales in the Asia/Pacific segment were up 25.5% year on year to $236 million. The segment reported an operating profit of $24 million compared with the year-ago quarter’s $12 million.
Financial Update
AGCO reported cash and cash equivalents of $511 million as of Sep 30, 2020, up from the $433 million recorded as of Dec 31, 2019. The company generated $224 million of cash from operating activities during the nine-month period ended Sep 30, 2020 as against the cash utilization of $80 million in the comparable period last year.
Guidance
The company expects net sales for the ongoing year to be $8.9 billion, reflecting flat demand in its end-markets and unfavorable foreign currency translation impact. However, this will be partly offset by the benefit of positive pricing. Adjusted operating margins are expected to be better than the 2019 levels on positive pricing and lower expenses. Based on these, AGCO expects adjusted earnings per share (EPS) for the current year to be $5.00, up from the prior guided range of $3.50 to $3.75.
Global crop production remains strong and is set for another record crop year despite the pandemic. Global grain consumption is recovering with improving economic activities and increased grain exports to China. Industry demand for farm equipment is expected to be relatively flat year over year in 2020, on improved demand in North and South America. Solid crop production in Brazil and Argentina, as well as favorable exchange rates, have been supporting positive economics in South America. Apart from this, AGCO is focused on investing in premium technology, smart farming solutions and enhanced digital capabilities for customers.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 14.54% due to these changes.
VGM Scores
At this time, Agco has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Agco has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Why Is Agco (AGCO) Up 6.3% Since Last Earnings Report?
It has been about a month since the last earnings report for Agco (AGCO - Free Report) . Shares have added about 6.3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Agco due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
AGCO Corp's Q3 Earnings & Sales Top Estimates, View Up
AGCO delivered third-quarter 2020 adjusted earnings per share of $2.09, up a whopping 155% year over year. The reported figure beat the Zacks Consensus Estimate of $1.02 per share. The company’s quarterly results reflect sales growth and margin expansion across all segments.
Revenues increased 18.4% year over year to $2,498 million during the September-end quarter. The top-line figure also beat the Zacks Consensus Estimate of $2,159 million. Excluding the unfavorable currency-translation impact of 1.6%, net sales increased 20% year over year.
Operational Update
Cost of sales grew 15.6% year over year to $1,919 million in the third quarter. Gross profit was up 28.6% year over year to $579 million during the reported quarter. Gross margin came in at 23.2% compared with the prior-year period’s 21.3%.
Selling, general and administrative expenses flared up to $251 million from the year-ago quarter’s $245 million. Adjusted income from operations surged 110% year over year to $225 million. Consequently, operating margin came in at 9% compared with the year-earlier quarter’s 5%.
Segment Performance
Sales in the North America segment were up 8.6% year over year to $582 million during the July-September period. The segment reported an operating income of $58 million compared with the prior-year quarter’s $33million.
Sales in the South America segment climbed 14.6% year over year to $274 million. The segment reported an operating profit of $16.7 million, as against the prior-year quarter’s operating loss of $5.6 million.
The EME (Europe/Middle East) segment’s sales came in at $1,406 million compared with the $1,146 million recorded in the year-ago period. The EME’s operating income jumped 54% year over year to $188 million.
Sales in the Asia/Pacific segment were up 25.5% year on year to $236 million. The segment reported an operating profit of $24 million compared with the year-ago quarter’s $12 million.
Financial Update
AGCO reported cash and cash equivalents of $511 million as of Sep 30, 2020, up from the $433 million recorded as of Dec 31, 2019. The company generated $224 million of cash from operating activities during the nine-month period ended Sep 30, 2020 as against the cash utilization of $80 million in the comparable period last year.
Guidance
The company expects net sales for the ongoing year to be $8.9 billion, reflecting flat demand in its end-markets and unfavorable foreign currency translation impact. However, this will be partly offset by the benefit of positive pricing. Adjusted operating margins are expected to be better than the 2019 levels on positive pricing and lower expenses. Based on these, AGCO expects adjusted earnings per share (EPS) for the current year to be $5.00, up from the prior guided range of $3.50 to $3.75.
Global crop production remains strong and is set for another record crop year despite the pandemic. Global grain consumption is recovering with improving economic activities and increased grain exports to China. Industry demand for farm equipment is expected to be relatively flat year over year in 2020, on improved demand in North and South America. Solid crop production in Brazil and Argentina, as well as favorable exchange rates, have been supporting positive economics in South America. Apart from this, AGCO is focused on investing in premium technology, smart farming solutions and enhanced digital capabilities for customers.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 14.54% due to these changes.
VGM Scores
At this time, Agco has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Agco has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.