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AGCO Corporation (AGCO - Free Report) is a global manufacturer and distributor of agricultural equipment and related replacement parts. The company offers horsepower tractors for row crop production, soil cultivation, planting, land leveling, and seeding operations.
The machinery manufacturer also provides smart farming technologies and products such as loader wagons, spreaders, mowers, ventilation and watering systems, and field cultivators.
AGCO markets its products under the Fendt, GSI, Massy Ferguson, Precision Planting, and Valtra brands through a network of independent dealers and distributors. The company was founded in 1990 and is based in Duluth, Georgia.
The Zacks Rundown
AGCO, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Manufacturing – Farm Equipment industry group, which currently ranks in the bottom 1% out of approximately 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months, just as it has over the past year:
Image Source: Zacks Investment Research
Candidates in the bottom tiers of industries can often be intriguing short candidates. While individual stocks have the ability to outperform even when included in a lackluster industry, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
Along with many other farm equipment stocks, AGCO shares have been struggling this year while the general market returned to new heights. The stock is hitting a series of lower lows and represents a compelling short opportunity as we head deeper into the latter half of the year.
Recent Earnings Misses & Deteriorating Outlook
The agricultural machinery company has fallen short of earnings estimates in two of the past three quarters. Back in July, AGCO reported second-quarter earnings of $2.53/share, missing the $2.88/share Zacks Consensus estimate by -12.2%. Consistently falling short of earnings estimates is a recipe for underperformance, and AGCO is no exception.
AGCO has been on the receiving end of negative earnings estimate revisions as of late. Looking at the full year, analysts have slashed estimates by -35.05% in the past 60 days. The 2024 Zacks Consensus Estimate is now $7.93/share, reflecting negative growth of -49% relative to the prior year.
Image Source: Zacks Investment Research
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
Technical Outlook
As illustrated below, AGCO stock is in a sustained downtrend. Notice how the stock has continued to meet resistance at important technical levels in the 50-day moving average (blue line) and the 200-day moving average (red line). Also note how both moving averages are sloping down – another good sign for the bears.
Image Source: StockCharts
AGCO stock has experienced what is known as a “death cross,” whereby the stock’s 50-day moving average crosses below its 200-day moving average. The stock would have to make an outsized move to the upside and show increasing earnings estimate revisions to warrant taking any long positions. Shares have fallen more than 27% this year alone.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock is not set to make its way to new highs anytime soon. The fact that AGCO is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of AGCO until the situation shows major signs of improvement.
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Bear of the Day: AGCO Corp. (AGCO)
AGCO Corporation (AGCO - Free Report) is a global manufacturer and distributor of agricultural equipment and related replacement parts. The company offers horsepower tractors for row crop production, soil cultivation, planting, land leveling, and seeding operations.
The machinery manufacturer also provides smart farming technologies and products such as loader wagons, spreaders, mowers, ventilation and watering systems, and field cultivators.
AGCO markets its products under the Fendt, GSI, Massy Ferguson, Precision Planting, and Valtra brands through a network of independent dealers and distributors. The company was founded in 1990 and is based in Duluth, Georgia.
The Zacks Rundown
AGCO, a Zacks Rank #5 (Strong Sell), is a component of the Zacks Manufacturing – Farm Equipment industry group, which currently ranks in the bottom 1% out of approximately 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months, just as it has over the past year:
Image Source: Zacks Investment Research
Candidates in the bottom tiers of industries can often be intriguing short candidates. While individual stocks have the ability to outperform even when included in a lackluster industry, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
Along with many other farm equipment stocks, AGCO shares have been struggling this year while the general market returned to new heights. The stock is hitting a series of lower lows and represents a compelling short opportunity as we head deeper into the latter half of the year.
Recent Earnings Misses & Deteriorating Outlook
The agricultural machinery company has fallen short of earnings estimates in two of the past three quarters. Back in July, AGCO reported second-quarter earnings of $2.53/share, missing the $2.88/share Zacks Consensus estimate by -12.2%. Consistently falling short of earnings estimates is a recipe for underperformance, and AGCO is no exception.
AGCO has been on the receiving end of negative earnings estimate revisions as of late. Looking at the full year, analysts have slashed estimates by -35.05% in the past 60 days. The 2024 Zacks Consensus Estimate is now $7.93/share, reflecting negative growth of -49% relative to the prior year.
Image Source: Zacks Investment Research
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
Technical Outlook
As illustrated below, AGCO stock is in a sustained downtrend. Notice how the stock has continued to meet resistance at important technical levels in the 50-day moving average (blue line) and the 200-day moving average (red line). Also note how both moving averages are sloping down – another good sign for the bears.
Image Source: StockCharts
AGCO stock has experienced what is known as a “death cross,” whereby the stock’s 50-day moving average crosses below its 200-day moving average. The stock would have to make an outsized move to the upside and show increasing earnings estimate revisions to warrant taking any long positions. Shares have fallen more than 27% this year alone.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock is not set to make its way to new highs anytime soon. The fact that AGCO is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of AGCO until the situation shows major signs of improvement.