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AGCO Corp (AGCO) Up 27% So Far This Year: What's Driving It?

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·3 min read
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AGCO Corporation’s AGCO shares have gained 27.2% so far this year, outperforming the industry’s growth of 26.9%. This price appreciation can be attributed to higher agricultural commodity prices, which is fueling demand for farm equipment. Moreover, focus on investment in precision agriculture are contributing to this price rally.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Let’s delve deeper and analyze the factors driving the stock.

Driving Factors

Global commodity prices have regained footing after declining significantly in the earlier part of 2020 amid the pandemic. This, in turn, is driving farm income and encouraging farmers to invest more in agricultural equipment.

AGCO anticipates sales and earnings growth in the current year to gain on improving industry conditions across all major markets. The company projects net sales for the ongoing year to lie between $10.6 billion and $10.8 billion, up from the prior forecast of $10.2 billion to $10.4 billion. The upbeat guidance suggests improved sales volumes, pricing and positive impacts of foreign-currency translation. Considering these, AGCO estimates adjusted earnings per share for the current year in the range of $8.40 to $8.60, up from the prior projection of $7.00 to $7.25.

The company anticipates industry sales across North and South America, and the European Union to trend higher this year on rising commodity prices and improved farmer sentiment. Further, the need to replace an ageing fleet with technologically-advanced equipment will drive demand. Moreover, AGCO continues to gain from increased grain consumption on economic recovery and higher export demand.

The company continues to invest in products, premium technology and smart farming solutions to improve distribution and enhance digital capabilities, in order to boost margins and strengthen product offerings. These improvements will aid AGCO’s investments in precision agriculture and digital initiatives. The company has also been making investments to upgrade system capabilities, expand product lines and improve factory productivity.

Positive Growth Projection

The company’s earnings estimate for the current year is pegged at $8.67, at present, indicating year-over-year growth of 54.6%.

Zacks Rank & Other Stocks to Consider

AGCO Corporation currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A few other top-ranked stocks in the Industrial Products sector are Tennant Company TNC, Encore Wire Corp. WIRE and Arconic Corp. ARNC. All of these stocks sport a Zacks Rank #1, at present.

Tennant has an anticipated earnings growth rate of 49.5% for 2021. The company’s shares have gained around 18%, year to date.

Encore Wire has an estimated earnings growth rate of 49.5% for the ongoing year. Year to date, the company’s shares have rallied nearly 36%.

Arconic has a projected earnings growth rate of 447% for the current year. The stock has appreciated around 21%, so far this year.

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AGCO Corporation (AGCO) : Free Stock Analysis Report

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