AGCO Corp (AGCO) Beats Earnings Estimates in Q2, Ups View
AGCO Corporation AGCO delivered an adjusted earnings per share of $4.29 in second-quarter 2023 compared with the prior-year quarter’s $2.38. The reported figure beat the Zacks Consensus Estimate of $3.72.
Including one-time items, AGCO posted an EPS of $4.26 compared with the year-ago quarter’s $2.37.
Revenues increased 29.8% year over year to a record $3,823 million in the June-end quarter. The top line surpassed the Zacks Consensus Estimate of $3,704 million. Excluding the unfavorable currency-translation impacts of 0.8%, net sales rose 30.6% year over year.
We predicted net sales to rise 22.4% in the quarter, excluding the unfavorable impacts of currency translation. Our model predicted a 1.7% impact of currency translation.
Operational Update
Cost of sales increased 24.9% year over year to $2,817 million in the second quarter. The gross profit increased 45.6% year over year to $1,006 million in the reported quarter. The gross margin was 26.3% compared with the prior-year quarter’s 23.4%.
Selling, general and administrative expenses were $349 million compared with the year-ago quarter’s $303 million. The adjusted income from operations rose 90.3% year over year to $502 million. The operating margin was 13.1% compared with the year-earlier quarter’s 9%.
AGCO Corporation Price, Consensus and EPS Surprise
AGCO Corporation price-consensus-eps-surprise-chart | AGCO Corporation Quote
Segmental Performance
Sales in the North America segment moved up 34.7% year over year to $997 million in the second quarter. The reported figure surpassed our estimate of $917 million. The segment reported an operating income of $137 million compared with the prior-year quarter’s $51 million. Our projection for the segment’s operating income was $105 million. The variance was mainly due to increased sales of high-horsepower tractors, combines and application equipment, as well as the effects of positive pricing that offset inflationary cost pressures.
Sales in the South America segment increased 15.3% year over year to $599 million. We expected the segment’s net sales to be $608 million. The variance was caused primarily due to lower sales in Argentina. The segment reported an operating profit of $121 million compared with the prior-year quarter’s $86 million. Our estimate for the segment's operating income was $114 million. The upside was driven by higher sales and production, and a favorable sales mix.
The EME (Europe/Middle East) segment’s sales were $1,991 million compared with the $1,468 million reported in the year-ago period. The reported figure surpassed our estimate of $1,792 million, driven by higher-than-expected sales and favorable pricing. The EME’s operating income was $295 million compared with the year-ago quarter’s $161 million. We predicted EME’s operating income to be $220 million.
Sales in the Asia/Pacific segment were up 8.2% year over year to $237 million. We expected the segment’s sales to be $240 million. The segment registered an operating profit of $21 million compared with the year-ago quarter’s $31 million. Our projection for the segment’s operating profit was $27 million.
Financial Update
AGCO Corp reported cash and cash equivalents of $464 million at the end of the second quarter of 2023, down from $581 million at the second-quarter 2022 end. Net cash generated from operating activities totaled $192 in the quarter compared with $10 million in the prior-year period.
Guidance
AGCO Corp expects 2023 net sales of $14.7 billion, up from the $14.5 billion stated earlier. The company expects improved sales volumes and positive pricing to aid the 2023 results. These tailwinds will be partially offset by a negative foreign currency translation.
The 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. The improved profitability is likely to support incremental investments in engineering and other technology to advance AGCO’s precision agriculture and digital initiatives. Considering these, management projects an EPS of $15.25 for 2023, up from the previously disclosed $14.40.
Price Performance
AGCO Corp’s shares have gained 26.4% in the past year compared with the industry’s growth of 27%.
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Zacks Rank & Other Stocks to Consider
AGCO Corp currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks from the Industrial Products sector are Worthington Industries, Inc. WOR, The Manitowoc Company, Inc. MTW and W.W. Grainger, Inc. GWW. WOR and MTW sport a Zacks Rank #1 (Strong Buy), at present and GWW has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Worthington Industries has an average trailing four-quarter earnings surprise of 14.9%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $5.65 per share. The consensus estimate for 2023 earnings has moved 22.6% north in the past 60 days. Its shares have gained 52% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 256.3%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at $1.12 per share. The consensus estimate for 2023 earnings has moved 7.8% north in the past 60 days. MTW’s shares have gained 58% in the last year.
The Zacks Consensus Estimate for Grainger’s 2023 earnings per share is pegged at $35.86, up 1% in the past 60 days. It has a trailing four-quarter average earnings surprise of 9.1%. GWW gained 56% in the last year.
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