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Here's Why You Should Hold AGCO Corp (AGCO) in Your Portfolio
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AGCO Corporation (AGCO - Free Report) has been gaining from increased sales across most of its business due to strong demand. Recent investments are also aiding the company’s growth.
Although AGCO is exposed to headwinds like material and logistic cost inflation, high production costs, and increased operating expenses, these will be offset by its pricing actions.
Let’s delve deeper and analyze the factors that make this Zacks Rank #3 (Hold) stock worth holding on to at present.
Solid Q1 Results: AGCO delivered an adjusted EPS of $3.51 in first-quarter 2023 compared with the prior-year quarter’s $2.39. The reported figure beat the Zacks Consensus Estimate of $2.64.
Revenues increased 24.1% year over year to a record $3,334 million in the March-end quarter. The top line surpassed the Zacks Consensus Estimate of $3,146 million.
Positive Earnings Surprise History: AGCO has an average trailing four-quarter earnings surprise of 14.8%.
Upbeat Growth Projections: The Zacks Consensus Estimate for the company’s 2023 earnings has moved 7.4% upward over the past 60 days and is pegged at $14.53 per share. It suggests growth of 17% from the year-ago reported figure.
Upbeat FY23 Outlook: AGCO Corp expects 2023 net sales to be $14.5 billion. The company anticipates improved sales volumes and positive pricing to impact the 2023 results.
Gross and operating margins are expected to be higher than the 2022 reported levels, owing to rising sales and production volumes, as well as the company’s pricing actions to mitigate material and labor cost inflation.
Considering these, management projects an EPS of $14.40 for 2023.
Price Performance: AGCO Corp’s shares have gained 30.6% in the past year compared with the industry’s growth of 31.7%.
Image Source: Zacks Investment Research
Higher Sales & Positive Pricing Actions: AGCO will gain on demand across all the major global markets in the upcoming quarters, owing to favorable farm economics.
In North America, AGCO is benefitting from increased sales of tractors and precision planting equipment, along with the effects of pricing that are mitigating inflationary cost pressure.
South America sales are growing strongly across all markets, owing to robust industry demand and favorable pricing impacts.
Strong growth in France, Turkey, Central Europe and Scandinavia is driving the results in Europe/Middle East. The Asia/Pacific segment’s sales are gaining from higher sales and a richer sales mix.
The momentum is expected to continue in the forthcoming quarters.
Strategic Investments: AGCO continues to invest in products, premium technology and sustainable smart farming solutions to improve distribution, enhance digital capabilities, expand product lines and improve factory productivity in order to drive margins and strengthen product offerings.
These improvements will support AGCO’s investments in precision agriculture and digital initiatives, driving higher sales growth and margin. The company is expanding its capability by increasing engineering expenses, while investing in acquisitions.
Near-Term Concerns
AGCO continues to experience significant component shortages due to supply-chain tightness, which is impacting production levels and unit shipments.
Material cost inflation and higher engineering expenses are worrisome. Moreover, the company is facing the impacts of currency translation.
If commodity prices decline again, farmers will adopt a cautious stance regarding their spending on equipment, which will hurt AGCO’s top-line performance. Also, farmers are witnessing higher production costs, particularly fertilizers.
This may impede their purchasing power if commodity prices decline again.
Terex has an average trailing four-quarter earnings surprise of 27.1%. The Zacks Consensus Estimate for TEX’s fiscal 2023 earnings is pegged at $5.92 per share. The consensus estimate for 2023 earnings has moved north by 20.8% in the past 60 days. Its shares gained 114.2% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 38.8%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at 85 cents per share. The consensus estimate for 2023 earnings has moved 63.5% north in the past 60 days. MTW’s shares gained 77.7% in the last year.
The Zacks Consensus Estimate for Grainger’s 2023 earnings per share is pegged at $35.83, up 7.6% in the past 60 days. It has a trailing four-quarter average earnings surprise of 9.1%. GWW gained 71.2% in the last year.
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Here's Why You Should Hold AGCO Corp (AGCO) in Your Portfolio
AGCO Corporation (AGCO - Free Report) has been gaining from increased sales across most of its business due to strong demand. Recent investments are also aiding the company’s growth.
Although AGCO is exposed to headwinds like material and logistic cost inflation, high production costs, and increased operating expenses, these will be offset by its pricing actions.
Let’s delve deeper and analyze the factors that make this Zacks Rank #3 (Hold) stock worth holding on to at present.
Solid Q1 Results: AGCO delivered an adjusted EPS of $3.51 in first-quarter 2023 compared with the prior-year quarter’s $2.39. The reported figure beat the Zacks Consensus Estimate of $2.64.
Revenues increased 24.1% year over year to a record $3,334 million in the March-end quarter. The top line surpassed the Zacks Consensus Estimate of $3,146 million.
Positive Earnings Surprise History: AGCO has an average trailing four-quarter earnings surprise of 14.8%.
Upbeat Growth Projections: The Zacks Consensus Estimate for the company’s 2023 earnings has moved 7.4% upward over the past 60 days and is pegged at $14.53 per share. It suggests growth of 17% from the year-ago reported figure.
Upbeat FY23 Outlook: AGCO Corp expects 2023 net sales to be $14.5 billion. The company anticipates improved sales volumes and positive pricing to impact the 2023 results.
Gross and operating margins are expected to be higher than the 2022 reported levels, owing to rising sales and production volumes, as well as the company’s pricing actions to mitigate material and labor cost inflation.
Considering these, management projects an EPS of $14.40 for 2023.
Price Performance: AGCO Corp’s shares have gained 30.6% in the past year compared with the industry’s growth of 31.7%.
Image Source: Zacks Investment Research
Higher Sales & Positive Pricing Actions: AGCO will gain on demand across all the major global markets in the upcoming quarters, owing to favorable farm economics.
In North America, AGCO is benefitting from increased sales of tractors and precision planting equipment, along with the effects of pricing that are mitigating inflationary cost pressure.
South America sales are growing strongly across all markets, owing to robust industry demand and favorable pricing impacts.
Strong growth in France, Turkey, Central Europe and Scandinavia is driving the results in Europe/Middle East. The Asia/Pacific segment’s sales are gaining from higher sales and a richer sales mix.
The momentum is expected to continue in the forthcoming quarters.
Strategic Investments: AGCO continues to invest in products, premium technology and sustainable smart farming solutions to improve distribution, enhance digital capabilities, expand product lines and improve factory productivity in order to drive margins and strengthen product offerings.
These improvements will support AGCO’s investments in precision agriculture and digital initiatives, driving higher sales growth and margin. The company is expanding its capability by increasing engineering expenses, while investing in acquisitions.
Near-Term Concerns
AGCO continues to experience significant component shortages due to supply-chain tightness, which is impacting production levels and unit shipments.
Material cost inflation and higher engineering expenses are worrisome. Moreover, the company is facing the impacts of currency translation.
If commodity prices decline again, farmers will adopt a cautious stance regarding their spending on equipment, which will hurt AGCO’s top-line performance. Also, farmers are witnessing higher production costs, particularly fertilizers.
This may impede their purchasing power if commodity prices decline again.
Stocks to Consider
Some better-ranked stocks from the Industrial Products sector are Terex Corporation (TEX - Free Report) , The Manitowoc Company, Inc. (MTW - Free Report) and W.W. Grainger, Inc. (GWW - Free Report) . TEX and MTW flaunt a Zacks Rank #1 (Strong Buy) at present, and GWW has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Terex has an average trailing four-quarter earnings surprise of 27.1%. The Zacks Consensus Estimate for TEX’s fiscal 2023 earnings is pegged at $5.92 per share. The consensus estimate for 2023 earnings has moved north by 20.8% in the past 60 days. Its shares gained 114.2% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 38.8%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at 85 cents per share. The consensus estimate for 2023 earnings has moved 63.5% north in the past 60 days. MTW’s shares gained 77.7% in the last year.
The Zacks Consensus Estimate for Grainger’s 2023 earnings per share is pegged at $35.83, up 7.6% in the past 60 days. It has a trailing four-quarter average earnings surprise of 9.1%. GWW gained 71.2% in the last year.