Why Is Agco (AGCO) Down 5.9% Since Last Earnings Report?
A month has gone by since the last earnings report for Agco (AGCO). Shares have lost about 5.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Agco due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
AGCO Corp Earnings and Revenues Miss Estimates in Q4
AGCO delivered an adjusted EPS of $3.78 in fourth-quarter 2023 compared with the prior-year quarter’s $4.47 per share. The reported figure missed the Zacks Consensus Estimate of $4.03.
Including one-time items, AGCO posted an EPS of $4.53 compared with the year-ago quarter’s $4.29.
Revenues decreased 2.5% year over year to $3.8 billion in the December-end quarter. The top line missed the Zacks Consensus Estimate of $4.06 billion. Excluding the favorable currency-translation impacts of 1.8%, net sales fell 4.3% year over year.
We predicted net sales to increase 4.9% year over year in the quarter, excluding the impacts of currency translation. Our
model predicted a 3.9% favorable impact of currency translation.
Operational Update
Cost of sales decreased 4.7% year over year to $2.82 billion in the fourth quarter. Gross profit increased 4.5% year over year to $983 million in the reported quarter. The gross margin was 25.9% compared with the prior-year quarter’s 24.1%.
Selling, general and administrative expenses were $417 million compared with the year-ago quarter’s $326 million. Adjusted income from operations fell 13.3% year over year to $405 million. The operating margin was 10.7% compared with the year-earlier quarter’s 12%.
Segmental Performance
Sales in the North America segment moved up 8.3% year over year to $892 million in the fourth quarter. The reported figure topped our estimate of $847 million. The segment reported an operating income of $80.5 million compared with the prior-year quarter’s $61 million. Our projection for the segment’s operating income was $94 million.
Sales in the South America segment decreased 38.9% year over year to $412 million. We expected the segment’s net sales to be $744 million. The segment reported an operating profit of $16 million compared with the prior-year quarter’s $135 million. Our estimate for the segment's operating income was $121 million. The downside was driven by lower commodity prices and farm income.
The EME (Europe/Middle East) segment’s sales were $2.26 billion compared with the $2.19-billion reported in the year-ago period. The reported figure missed our estimate of $2.3 billion. The EME’s operating income was $367 million compared with the year-ago quarter’s $319 million. We predicted EME’s operating income to be $261 million.
Sales in the Asia/Pacific segment were up 11.3% year over year to $238 million. We expected the segment’s sales to be $196 million. The segment registered an operating profit of $19 million, flat year over year. Our projection for the segment’s operating profit was $18.5 million.
Financial Update
AGCO Corp reported cash and cash equivalents of $596 million at the end of 2023, down from $790 million at 2022-end. Net cash provided by operating activities totaled $1.1 billion in 2023 compared with $0.84 billion in 2022.
2023 Performance
The company delivered an adjusted EPS of $15.55 compared with $12.42 in 2022. The reported figure missed the Zacks Consensus Estimate of $15.79.
Including one-time items, AGCO posted an EPS of $15.63 compared with the year-ago quarter’s $11.87.
Revenues increased 13.9% year over year to a record $14.41 billion in 2023. The top line missed the Zacks Consensus Estimate of $14.67 billion. Excluding the favorable currency-translation impacts of 0.1%, net sales rose 13.8% year over year.
Guidance
AGCO Corp expects net sales of $13.6 billion for 2024. The company anticipates lower sales volumes to impact the 2024 results. This will be partially offset by modest positive pricing and favorable foreign currency translation. Considering these, management projects an EPS of $13.15 for 2024.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -13.34% due to these changes.
VGM Scores
At this time, Agco has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Agco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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