AGCO Corporation (NYSE:AGCO) investors will be delighted, with the company turning in some strong numbers with its latest results. It was overall a positive result, with revenues beating expectations by 4.6% to hit US$1.9b. AGCO also reported a statutory profit of US$0.85, which was an impressive 105% above what the analysts had forecast. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the current consensus, from the 16 analysts covering AGCO, is for revenues of US$7.97b in 2020, which would reflect a chunky 11% reduction in AGCO's sales over the past 12 months. Statutory earnings per share are predicted to bounce 38% to US$2.27. In the lead-up to this report, the analysts had been modelling revenues of US$7.78b and earnings per share (EPS) of US$2.12 in 2020. It looks like there's been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.
Despite these upgrades,the analysts have not made any major changes to their price target of US$60.24, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values AGCO at US$76.00 per share, while the most bearish prices it at US$44.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the AGCO's past performance and to peers in the same industry. These estimates imply that sales are expected to slow, with a forecast revenue decline of 11%, a significant reduction from annual growth of 4.0% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.9% next year. It's pretty clear that AGCO's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around AGCO's earnings potential next year. Fortunately, they also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider industry. The consensus price target held steady at US$60.24, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on AGCO. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for AGCO going out to 2022, and you can see them free on our platform here..
Don't forget that there may still be risks. For instance, we've identified 4 warning signs for AGCO that you should be aware of.
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