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AGCO Corp's (AGCO) Shares Up 47% in 6 Months: What's Driving It?

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AGCO Corporation AGCO is benefiting from forecast-topping first-quarter 2021 results as well as higher agricultural commodity prices, spurring farm equipment demand. The stock has gained 47.3% over the past six months, outperforming the industry’s growth of 37.8%. Moreover, improved industry demand and focus on investment in precision agriculture are also contributing to this price appreciation.

Let’s delve deeper and analyze the factors driving the stock.

Q1 Earnings & Sales Top Estimates

AGCO Corporation delivered adjusted earnings per share of $2.00 in first-quarter 2021 compared with the prior-year quarter’s 86 cents. The reported figure beat the Zacks Consensus Estimate of $1.11 as well. Revenues of $2,379 million increased 23.4% year over year and surpassed the Zacks Consensus Estimate of $2,215 million.

Driving Factors

Global commodity prices have regained footing after declining significantly in the earlier part of 2020 amid the pandemic. This, in turn, is driving farm income and encouraging farmers to invest more in agricultural equipment.

AGCO anticipates sales and earnings growth in the current year to gain on improving industry conditions across all major markets. The company projects net sales for the ongoing year to lie between $10.6 billion and $10.8 billion, up from the prior forecast of $10.2 billion to $10.4 billion. The upbeat guidance suggests improved sales volumes, pricing and positive impacts of foreign-currency translation. Considering these, AGCO estimates adjusted earnings per share for the current year in the range of $8.40 to $8.60, up from the prior projection of $7.00 to $7.25.

The company forecasts the North American industry sales to trend higher this year on escalating commodity prices and improved farmer sentiment. Further, the need to replace an ageing fleet with technologically-advanced equipment will drive demand. In European Union (EU) farming, positive farm economics and higher commodity prices are likely to support healthy demand from the arable farming segment. Industry demand in Western Europe is anticipated to be strong and grow modestly in 2021. Elevated commodity prices and favorable exchange rates will likely fuel growth in South America this year as farmers continue to replace aged equipment.

The company continues to invest in products, premium technology and smart farming solutions to improve distribution and enhance digital capabilities in order to drive margins and strengthen product offerings. These improvements will aid AGCO’s investments in precision agriculture and digital initiatives. The company has also been making investments to upgrade system capabilities, expand product lines and improve factory productivity.

Zacks Rank & Other Stocks to Consider

AGCO Corporation currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other similarly-ranked stocks in the Industrial Products sector include Deere & Company DE, Avery Dennison Corporation AVY and Caterpillar Inc. CAT.

Deere has a projected earnings growth rate of 84.2% for fiscal 2021. Shares of the company have soared 154.4% over the past year.

Avery Dennison has an estimated earnings growth rate of 20.8% for 2021. The company’s shares have rallied 112% in a year’s time.

Caterpillar has an expected earnings growth rate of 45.6% for the ongoing year. Over the past year, the stock has appreciated 131%.

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