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AGCO Corp (AGCO) Declines 19% in a Year: What's Ailing the Stock?

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AGCO Corp. (AGCO - Free Report) shares lost 18.9% last year compared with the industry’s fall of 10.8%. This mainly reflects reduced sales volume, declines in production levels and low commodity prices.


Zacks Investment Research
Image Source: Zacks Investment Research


Let us take a look into the factors that are ailing this Zacks Rank #5 (Strong Sell) stock.

Lower Sales Volume: In North America, industry retail sales for the first quarter of 2024 declined year over year after being down in 2023 . The decline was due to lower sales of smaller equipment.

In Western Europe, retail tractor sales declined in 2023 after peaking in 2022. Increased interest rates and overall economic conditions hampered the demand. The company expects industry sales to fall further in 2024 and impact the top line.

Low Commodity Prices & Bleak Farm Fundamentals: High interest rates and a strong dollar took a toll on agricultural commodity prices last year. Soybean, corn and wheat prices have dipped lately as supply prospects from South America have improved due to favorable weather conditions in the backdrop of low demand.

Demand in China for soybeans is expected to go down due to the government's efforts to reduce and substitute the use of soybeans in animal feed to decrease the reliance on imports. Low commodity prices will weigh on farm income and might influence farmers’ investment decision-making.

The U.S. Department of Agriculture projects net farm income at $116.1 billion for 2024, indicating a decline of 27.1% from that reported in 2023. Moreover, the estimated net farm income for 2024 is 1.7% below its 20-year average (2003-2022) of $118.2 billion.

The decline mainly reflects lower prices, elevated production expenses and reduced direct government payments.

Unfavorable 2024 Outlook: For 2024, the company expects modest positive pricing and favorable foreign currency translation to be offset by lower sales volumes and production volumes. Backed by these, the company lowered its earnings per share projection to $12.00 from the previously stated $13.15 for 2024. The updated guidance indicates a 23% decline from the $15.55 reported in 2023.

The company anticipates net sales of $13.5 billion for 2024, suggesting a dip from a record $14.41 billion reported in 2023.

Higher Costs & Supply Issues Persist: 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 other woes.

Stocks to Consider

Some better-ranked stocks from the Industrial Products sector are Intellicheck, Inc. (IDN - Free Report) , Applied Industrial Technologies (AIT - Free Report) and Cintas Corporation (CTAS - Free Report) . IDN currently sports a Zacks Rank #1 (Strong Buy), and AIT and CTAS carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Intellicheck’s 2024 earnings is pegged at 2 cents per share. This indicates solid growth from the loss of 2 cents reported in 2023. The consensus estimate for 2024 earnings has been unchanged in the past 60 days. The company has a trailing four-quarter average earnings surprise of 28.9%. IDN shares have gained 57.8% in a year.

Applied Industrial has an average trailing four-quarter earnings surprise of 8.2%. The Zacks Consensus Estimate for AIT’s 2024 earnings is pinned at $9.62 per share, which indicates year-over-year growth of 9.9%. Estimates have moved north by 2% in the past 60 days. The company’s shares have gained 36.5% in a year.

The Zacks Consensus Estimate for Cintas Corporation’s 2024 earnings is pegged at $14.95 per share, indicating year-over-year growth of 15%. The consensus estimate for 2024 earnings has been unchanged in the past 60 days. The company has a trailing four-quarter average earnings surprise of 4.3%. CTAS shares have gained 43.5% in a year.

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