We issued an updated research report on AGCO Corporation AGCO on Jul 4. The manufacturer of farm equipment is likely to benefit from focus on product development. Increased investments through capital expenditures and engineering spend, as well as long-term capital allocation plan will also aid growth.
AGCO continues to invest in initiatives which will drive long-term benefits, raise the efficiency of factories, improve service levels, as well as strengthen the company’s product offerings. The company’s consistent efforts to refresh its full line of equipment, with focus on high horsepower products for the growing professional farming sector, as well as new products, will expand the current product offering.
AGCO’s new products have been performing very well in the market as evident from the number of awards received in Feb 2017 at the SIMA Farm Show in Paris, including the Machine of the Year Award for the Massey Ferguson 6718 S.
Despite the soft demand environment, the company continues to make strategic investments. AGCO intends to increase the level of investment to execute product development plans, resulting in increased capital expenditures and engineering spend during 2017. The company’s spending plan in 2017 is needed to maintain competitiveness and support the long-term prospects of its business.
In the first-quarter conference call, AGCO raised its net sales guidance to approximately $7.7 billion for 2017. The company projects earnings per share for 2017 to be approximately $2.70. For the long term, it expects elevated grain demand, driven by population growth and increased protein consumption, which will result in favorable income levels for farmers.
Despite these positives, AGCO underperformed the Zacks classified Machinery Farm sub-industry with respect to price performance over the past one year, mainly due to lower industry equipment demand and elevated expenses. The stock gained around 45.4%, while the industry recorded growth of 53.4%, over the same time frame.
AGCO currently carries a Zacks Rank #2 (Buy).
Other top-ranked stocks in the sector include Apogee Enterprises, Inc. APOG, Worthington Industries, Inc. WOR and Deere & Company DE. All three stocks boast a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Apogee has an average positive earnings surprise of 3.42% for the trailing four quarters.
Worthington generated an average positive earnings surprise of 4.05% over the past four quarters.
Deere has a remarkable average positive earnings surprise of 70.41% for the last four quarters.
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