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AGCO Corporation : UPDATE : Agco 4Q Profit More Than Triples; S America Outlook Cut

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02/07/2012 | 05:53pm CET

--Agco reiterates 2012 guidance for EPS of about $5

--Company lowers 2012 outlook for South America

--Agco sees 2012 sales of GSI Holdings above $750 million

(Adds comments from conference call, details throughout about market outlooks and regional sales.)

 
   By Bob Tita 
   Of  
 

Agco Corp.'s (>> AGCO Corporation) fourth-quarter earnings more than tripled, but the farm-machinery manufacturer lower its industry outlook for South America where Agco is the sales leader in farm tractors.

Agco, the world's third-largest manufacturer of farm equipment by sales, topped analysts' expectations for the fourth quarter, as results were helped by a tax gain, expanded margins and rising sales. The company also reiterated its 2012 guidance from December, but tweaked its forecast for tractor sales in South America.

Agco, whose brands include Massey Ferguson, Valtra and Challenger, said it now expects industry-wide sales in South America this year to be flat to down 5% from 2011, compared with Agco's December forecast of flat sales. Last week, competitor CNH Global N.V. (CNH) predicted South American machinery sales this year will fall by 5% to 10%.

"We're about expecting the market to be a little lower because of the dry weather" conditions, said Agco Chief Financial Officer Andy Beck during a conference call Tuesday with analysts.

Agco said industry-wide sales of tractors in South America last year dropped 3% from 2010 as weaker sales in Brazil and Argentina were offset partially by higher demand from other countries in the region. Agco has been facing tougher competition in Brazil--South America's largest farm-machinery market--from Deere & Co. (>> Deere & Company). Agco's share of the Brazilian tractor market was about 50% in 2011, down from 60% a couple of years ago, according to industry estimates.

Last month, Agco disclosed the purchase of a 60% stake in a Brazilian company that makes mechanized sugar-cane harvesters. Sales of sugar-cane harvesters are expected to surge in the coming years, as the Brazilian government tries to eliminate the practice of burning fields to make the cane easier to cut by hand. Agco executives said they believe the purchase of Santal Equipamentos will help Agco to combat market-share erosion in Brazil.

"It allows us to have a fuller offering of equipment for those sugar-cane customers," Beck said.

Elsewhere in the world, Agco said it sees industry-wide sales of tractors in North America being flat to up 5% in 2012, while sales in western Europe are expected to be flat with 2011. Agco said North American tractor sales last year rose 2% over 2010, while sales in western Europe increased 12%.

High prices for farm commodities have been driving expanded sales for tractors and harvesting combines, blunting the effects of sluggish economic growth last year in North America and Europe.

"Farm income has been extremely strong," said Chairman and Chief Executive Martin Richenhagen.

Agco, which is based in Georgia, bought grain-storage bin manufacturer GSI Holdings Corp. last autumn in bid to boost Agco's revenue and expand its penetration in the North American market, the company's weakest geographic market. Agco said it anticipates GSI's sales this year to exceed $750 million, up from about $700 million in 2011.

The company forecast that its overall sales would exceed $10 billion in 2012, a 14% increase from 2011. The company affirmed its earlier earnings estimate of about $5 a share.

For the quarter ended Dec. 31, Agco reported a profit of $285.2 million, or $2.90 a share, up from $85.2 million, or 87 cents a share, a year earlier.

Excluding a tax gain and acquisition expenses for GSI, earnings rose to $1.44 a share from 88 cents a year earlier. Revenue increased 16% to $2.52 billion. Analysts polled by Thomson Reuters projected earnings of $1.33 a share on revenue of $2.54 billion.

Agco's operating margin in fourth quarter improved to 7.6% from 7% a year earlier. Fourth-quarter sales in North America grew 30% from a year earlier, excluding unfavorable currency movements. The improvement stemmed from rising sales of newly launched models of high-horsepower tractors for large farms. In Europe, Africa and the Middle East segment, Agco's largest revenue contributor, sales rose 15%, while sales in South America expanded by 8%.

Agco's stock was recently down 4.2% at $51.46 a share.

-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com

--Tess Stynes and Lauren Pollock contributed to this article.

Stocks mentioned in the article : AGCO Corporation, Deere & Company
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Financials ($)
Sales 2017 7 451 M
EBIT 2017 339 M
Net income 2017 195 M
Debt 2017 1 123 M
Yield 2017 0,90%
P/E ratio 2017 25,17
P/E ratio 2018 20,56
EV / Sales 2017 0,82x
EV / Sales 2018 0,78x
Capitalization 4 969 M
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Mean consensus HOLD
Number of Analysts 18
Average target price 57,9 $
Spread / Average Target -6,4%
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NameTitle
Martin H. Richenhagen Chairman, President & Chief Executive Officer
Andrew H. Beck CFO, Principal Accounting Officer & Senior VP
Helmut R. Endres Senior Vice President-Engineering
P. George Benson Independent Non-Employee Director
Hendrikus Visser Independent Non-Employee Director
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