AGCO Corp (AGCO) Earnings Trump, Sales Trail Estimates in Q3
AGCO Corporation AGCO reported third-quarter adjusted earnings per share of 82 cents, down 9.9% year over year. The reported figure, however, surpassed the Zacks Consensus Estimate of 78 cents, delivering a positive earnings surprise of 5.1%.
Revenues declined 4.8% year over year to $2,109.4 million. The revenue figure also missed the Zacks Consensus Estimate of $2,175 million. Excluding unfavorable currency-translation impact of 3.1%, net sales edged down 1.7% year over year.
Farming conditions continue to be challenging in many key markets due to uncertainty regarding trade negotiations and lower yields. Nevertheless, price-realization initiatives and improved productivity helped offset lower sales and production volumes during the September-end quarter. The company’s focus on margin expansion also aided its quarterly results.
Operational Update
Cost of sales went down 4.7% to $1,659.2 million from the year-earlier quarter. Gross profit decreased 4.9% to $450.2 million in the quarter from the $473.3 million recorded in the year-ago quarter. Gross margin came in at 21.3% during the third quarter compared with the prior-year quarter’s 21.4%.
Selling, general and administrative expenses slipped 6% year over year to $245 million. Adjusted income from operations declined 4.9% year over year to $107.2 million. Consequently, operating margin came in at 5.1%, flat compared with the year-earlier quarter.
AGCO Corporation Price, Consensus and EPS Surprise
AGCO Corporation price-consensus-eps-surprise-chart | AGCO Corporation Quote
Segment Performance
Sales in the North America segment dropped around 1.7% year over year to $536.2 million during the July-September quarter. The segment reported operating income of $32.5 million, flat year on year. Late harvest and early winter weather have been putting pressure on corn and soybean harvests in North America.
Sales in the South America segment dipped around 14.8% year over year to $239.4 million. The segment reported an operating loss of $5.6 million, as against the prior year’s operating profit of $12.6 million.
The EME (Europe / Middle East) segment’s sales came in at $1,145.7 million, down 1.6% from the year-ago quarter’s reported tally. EME’s operating income climbed 12.3% year over year to $122 million.
Sales in the Asia/Pacific segment were down 15.8% year over year to $188.1 million. The segment reported income of $11.5 million, down from the prior year’s $17.6 million.
Financial Update
AGCO reported cash and cash equivalents of $282 million at the end of the third quarter, down from the $292.7 million registered at the prior-year quarter end. The company used $80.2 million of cash in operating activities during the nine-month period ended Sep 30, 2019, compared with cash usage of $4 million reported in the comparable period last year.
Guidance
AGCO now projects its net sales for 2019 at $9.3 billion, down from $9.35 billion in the prior-year, reflecting the negative foreign currency-translation impact and relatively flat sale volumes, offset by positive pricing. Based on these assumptions, the company anticipates gross and operating margin improvement from the previous year. The company has maintained its adjusted EPS guidance of $5.10.
AGCO projects year-over-year flat North American industry retail tractor sales for the current year. For 2019, while industry demand in Western Europe is expected to be flat, year on year, industry demand in South America is expected to decline.
Zacks Rank & Stocks to Consider
AGCO currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector are Sharps Compliance Corp SMED, Plug Power Inc. PLUG and Cintas Corporation CTAS. While Sharps Compliance sports a Zacks Rank #1 (Strong Buy), Plug Power and Cintas carry a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sharps Compliance has an expected earnings growth rate of a whopping 500% for the ongoing year. The company has gained 48.4% so far this year.
Plug Power has a projected earnings growth rate of 2.8% for the current year. The stock has gained 121.8% so far this year.
Cintas has an estimated earnings growth rate of 12.74% for 2019. Shares of the company have rallied 63.4% year to date.
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