AGCO Corp (AGCO) to Buy Trimble Assets to Boost Portfolio
AGCO Corporation AGCO has announced that it signed a joint venture contract with Trimble TRMB to acquire an 85% interest in Trimble’s portfolio of Ag assets and technologies. This move will accelerate AGCO’s transformation strategy by forming a joint venture that will become the world's premier mixed-fleet Precision Ag business.
The transaction will assist the development and distribution of next-generation Ag technologies by establishing a mixed-fleet Precision Ag platform that will be the only provider of Trimble Ag's comprehensive technology portfolio.
Trimble Ag provides a wide range of user-friendly technologies that are compatible with various brands, equipment models and farm varieties. Its technology, software and cloud-based applications cover the entire crop cycle, from land preparation to planting, seeding and harvesting.
The JV will further enhance AGCO's existing Precision Ag portfolio, allowing it to provide even more industry-leading solutions across the crop cycle, while supporting more than 10,000 equipment models. The acquisition is expected to boost AGCO's revenue growth, operating margin profile and earnings per share in the first full year following its completion.
AGCO is focused on better serving farmers. This JV will be positioned to drive outsized growth and provide next-generation technologies to even more farmers around the world by combining these two Precision Ag portfolios. The companies will leverage multi-channel access across Trimble Ag, AGCO OEM & Aftermarket, other OEMs, and Precision Planting dealers.
The purchase price of the transaction is set at $2 billion, which will be funded by a combination of AGCO’s existing liquidity, free cash flow generation and new debt. There is no financing condition on the transaction.
The transaction is expected to close in the first half of 2024, subject to regulatory approval and customary closing conditions.
AGCO Corp also announced that it placed its Grain & Protein business under strategic review. This was in line with AGCO's broader portfolio transformation strategy. AGCO will evaluate all strategic options to ensure that Grain & Protein customers are best served and that the business is best positioned to maximize its full potential.
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. 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.
Price Performance
AGCO Corp’s shares have gained 25.1% in the past year compared with the industry’s growth of 12%.
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Zacks Rank & Stocks to Consider
AGCO currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Industrial Products sector are Caterpillar Inc. CAT and Eaton Corporation plc. ETN. CAT sports a Zacks Rank #1 (Strong Buy) and ETN has a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Caterpillar has an average trailing four-quarter earnings surprise of 18.5%. The Zacks Consensus Estimate for CAT’s 2023 earnings is pegged at $19.81 per share. The consensus estimate for 2023 earnings has moved north by 11.4% in the past 60 days. Its shares gained 51.6% in the last year.
The Zacks Consensus Estimate for Eaton’s 2023 earnings per share is pegged at $8.80. The consensus estimate for 2023 earnings has moved 4% north in the past 60 days. It has a trailing four-quarter average earnings surprise of 3%. Shares of ETN rallied 68.8% in the last year.
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