AGCO Corp (AGCO) Beats Earnings & Revenue Estimates In Q3

AGCO Corporation (NYSE:AGCO) reported third-quarter 2018 adjusted earnings of 91 cents, which climbed 15% year over year. The reported figure also surpassed the Zacks Consensus Estimate of 83 cents.

Including restructuring and other infrequent expenses, the company reported earnings of 89 cents per share in the quarter, which increased 17% year over year.

AGCO generated revenues of $2,215 million, up around 11.5% from $1,986 million recorded in the year-ago quarter. Additionally, the revenue figure surpassed the Zacks Consensus Estimate of $2,137 million. Excluding favorable currency-translation impact of around 6%, net sales climbed approximately 17% year over year.

Operational Update

Cost of sales went up 12% to $1,741 million from the year-earlier quarter. Gross profit came in at $474 million in the quarter, jumping around 11% from $429 million reported in the year-ago quarter. Gross margin contracted 20 basis points (bps) year over year to 21.4%.

Selling, general and administrative expenses flared up 12% year over year to $261 million. Adjusted income from operations increased 12.7% year over year to $113 million. Consequently, operating margin shrunk 10 bps year over year to 5.1%.

Segment Performance

Sales in the North America segment improved around 13% year over year to $546 million in the third quarter. The segment reported operating income of $33 million, which climbed around 17% year over year.

Sales in the South America segment increased around 3% year over year to $281 million. The segment reported operating income of around $13 million compared to $9 million posted in the prior-year quarter.

The EAME (Europe/ Africa/ Middle East) segment’s sales came in at $1,165 million, up 14% from the year-ago quarter. EAME’s operating income jumped 12% to $109 million from $97 million reported in the prior-year quarter.

Sales in the Asia/Pacific segment ascended around 6% year over year to $224 million from $212 million recorded in the comparable period last year. The segment reported income of $18 million, up from $15 million in the year-ago quarter.

Financial Update

AGCO reported cash and cash equivalents of $293 million at the end of the reported quarter, down from $368 million at the end of 2017. The company used $19 million of cash in operating activities during the nine-month period ended Sep 30, 2018, compared with cash usage of $29 million reported in the comparable period last year.

Guidance

AGCO has reaffirmed its net sales 2018 outlook of $9.3 billion, on the back of 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 $3.75 from $3.70. It also anticipates gross and operating margins to improve from the 2017 levels, driven by higher net sales, as well as the benefits resulting from cost-reduction initiatives, partially offset by elevated engineering expenses and higher material costs.

AGCO projects that industry retail tractor sales will increase moderately in 2018, with improved retail sales in the row crop segment and flat retail sales of small tractors compared to last year. Furthermore, the company anticipates that industry demand in Western Europe will remain at the same level compared with 2017.

In addition, industry demand in South America will remain flat for the full year compared to 2017. Elevated retail sales in Brazil might be muted 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 underperformed the industry with respect to price performance. The stock has lost around 17%, while the industry recorded loss of 3% during the same time frame.

Zacks Rank & Key Picks

AGCO currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the same industry include DMC Global Inc. (NASDAQ:BOOM) , Enersys (NYSE:ENS) and Donaldson Company, Inc. (NYSE:DCI) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

DMC Global has a long-term earnings growth rate of 20%. The stock has surged 83% in a year’s time.

Enersys has a long-term earnings growth rate of 10%. The company’s shares have gained 16% over the past year.

Donaldson Company has a long-term earnings growth rate of 11.5%. Its shares have rallied 11% in the past year.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>