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What's in the Cards for AGCO Corp's (AGCO) Q4 Earnings?

Zacks Equity Research

AGCO Corporation AGCO is scheduled to report fourth-quarter 2019 results before the opening bell on Feb 6.

Which Way are the Estimates Headed?

The Zacks Consensus Estimate for the December-end quarter’s earnings per share is pegged at $1.55, suggesting year-over-year increase of 18.3%. The Zacks Consensus Estimate for total sales of $2.6 billion also represents a year-over-year rise of 2.7%.

A Sneak Peak into Q3 Performance

In the last reported quarter, AGCO’s earnings surpassed the Zacks Consensus Estimate, while sales missed the same. Both top and bottom lines declined year over year.
 
Notably, AGCO outpaced estimates in all of the trailing four quarters, the average beat being 32.7%.

Share Price Performance

AGCO’s shares have appreciated 12.1% over the past year, as against the industry’s decline of 2.3%.



Let’s see how things have shaped up prior to this announcement.

Factors to Consider

Benefits from cost-reduction initiatives and positive impact of pricing are expected to have bolstered AGCO’s gross and operating margins during the October-December period. AGCO is consistently making strategic investments in products and technology to enhance and expand its product lines, strengthen product offerings, upgrade system capabilities as well as improve factory productivity. These factors are likely to have contributed to its quarterly performance.

The Zacks Consensus Estimate for the North America segment’s sales is pinned at $566 million for the quarter, calling for year-over-year growth of 6.6%. The Zacks Consensus Estimate for the segment’s operating income is $21.05 million, indicating a significant jump of 239.5% from the year-ago quarter. Late harvest and slow crop production as well as ongoing trade concerns are likely to have adversely impacted the segment’s results in the to-be-reported quarter, while also straining large equipment sales. However, the segment’s margin and top-line results in the quarter are likely to have benefited from product introductions.

The Zacks Consensus Estimate for the South America segment’s fourth-quarter sales is $284 million, suggesting growth of 2.9% from the prior-year quarter's $276 million. The Zacks Consensus Estimate for the segment’s operating income is pegged at $.08 million, indicating a 99.2% slump from the year-ago quarter. Further, a bleak macro-economic scenario in Brazil and tepid demand in Argentina are expected to have thwarted margins during the period in discussion. Nevertheless, market conditions in South America are anticipated to have improved in the quarter.

The Zacks Consensus Estimate for the EME (Europe/Middle East) segment’s quarterly sales is pinned at $1,580 million, projecting a year-on-year rise of 4.5%. The segment’s operating income is expected to be up 10.8% year on year to $205 million. However, weak demand environment in Europe is a concern.

For the Asia/Pacific segment revenues, the Zacks Consensus Estimate is pegged at $262 million, indicating a fall of 4%, year on year. The Zacks Consensus Estimate for the segment’s operating income is anticipated to have edged up to $24.98 million from prior-year quarter’s $22.7 million.

Weak agricultural market, low commodity prices, prevalent trade tensions, along with poor growing and harvesting conditions are likely to have eroded AGCO’s top line in the December-end quarter. Further, currency translation and higher engineering expenses might have impacted AGCO’s performance during the period.

AGCO Corporation Price and EPS Surprise

AGCO Corporation Price and EPS Surprise

AGCO Corporation price-eps-surprise | AGCO Corporation Quote

What Our Model Indicates

Our proven model doesn’t conclusively predict an earnings beat for AGCO this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for AGCO is -2.40%. This is because currently the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $1.51 per share and $1.55, respectively.

Zacks Rank: AGCO currently carries a Zacks Rank of 5 (Strong Sell).

Stocks Poised to Beat Earnings Estimates

Here are a few Industrial Products stocks which you may consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases.

Tennant Company TNC has an Earnings ESP of +4.20% and carries a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Valmont Industries, Inc. VMI currently carries a Zacks Rank #2 and an Earnings ESP of +2.93%.

Lincoln Electric Holdings, Inc. LECO, a Zacks #3 Ranked stock, has an Earnings ESP of +1.01%.

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