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Why Is Agco (AGCO) Down 3.3% Since Last Earnings Report?
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It has been about a month since the last earnings report for Agco (AGCO - Free Report) . Shares have lost about 3.3% 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 its most recent earnings report in order to get a better handle on the important drivers.
AGCO Q3 Earnings Beat Estimates, View Raised
AGCO delivered adjusted earnings per share of $3.97 in third-quarter 2023 compared with the prior-year quarter’s $3.18. The reported figure beat the Zacks Consensus Estimate of $3.27.
Including one-time items, AGCO posted an EPS of $3.74 compared with the year-ago quarter’s $3.18.
Revenues increased 10.7% year over year to $3,456 million in the September-end quarter. The top line missed the Zacks Consensus Estimate of $3,474 million. Excluding the favorable currency-translation impact of 3.5%, net sales rose 7.2% year over year.
We predicted net sales to increase by 10.9% in the quarter, excluding the impacts of currency translation. Our model predicted a 1% unfavorable impact of currency translation.
Operational Update
Cost of sales increased 5.8% year over year to $2,522 million in the third quarter. The gross profit increased 26.4% year over year to $934 million in the reported quarter. The gross margin was 27% compared with the prior-year quarter’s 23.7%.
Selling, general and administrative expenses were $354 million compared with the year-ago quarter’s $288 million. The adjusted income from operations rose 30.9% year over year to $436 million. The operating margin was 12.6% compared with the year-earlier quarter’s 10.7%.
Segmental Performance
Sales in the North America segment moved up 3.4% year over year to $941 million in the third quarter. The reported figure fell short of our estimate of $1,018 million. The segment reported an operating income of $139.8 million compared with the prior-year quarter’s $112.7 million. Our projection for the segment’s operating income was $80 million. The variance was mainly due to increased sales of high-horsepower tractors, combines and application equipment, as well as the effects of positive pricing that offset inflationary cost pressures.
Sales in the South America segment increased 26% year over year to $720 million. We expected the segment’s net sales to be $617 million. The variance was due to higher sales of high horsepower, higher margin tractors and increased sales of Momentum planters. The segment reported an operating profit of $150 million compared with the prior-year quarter’s $108 million. Our estimate for the segment's operating income was $116 million. The upside was driven by higher sales and production and a favorable sales mix.
The EME (Europe/Middle East) segment’s sales were $1,587 million compared with the $1,390 million reported in the year-ago period. The reported figure missed our estimate of $1,591 million. The EME’s operating income was $199 million compared with the year-ago quarter’s $142 million. We predicted EME’s operating income to be $205 million.
Sales in the Asia/Pacific segment were down 16.9% year over year to $208 million. We expected the segment’s sales to be $237 million. Lower sales in Japan fueled the decline. The segment registered an operating profit of $19 million compared with the year-ago quarter’s $33 million. Our projection for the segment’s operating profit was $18 million.
Financial Update
AGCO Corp reported cash and cash equivalents of $681 million at the end of the third quarter of 2023, down from $790 million at the 2022 end. Net cash generated from operating activities totaled $568 million in the quarter compared with $271 million in the prior year.
Guidance
AGCO Corp expects 2023 net sales of $14.7 billion. The company expects improved sales volumes and positive pricing to aid the 2023 results.
The gross and operating margins are expected to be higher than the 2022 reported levels, owing to rising sales and production volumes, as well as the company’s pricing actions to mitigate material and labor cost inflation. The improved profitability is likely to support incremental investments in engineering and other technology to advance AGCO’s precision agriculture and digital initiatives. Considering these, management projects an EPS of $15.75 for 2023, up from the previously disclosed $15.25.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, Agco has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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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Why Is Agco (AGCO) Down 3.3% Since Last Earnings Report?
It has been about a month since the last earnings report for Agco (AGCO - Free Report) . Shares have lost about 3.3% 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 its most recent earnings report in order to get a better handle on the important drivers.
AGCO Q3 Earnings Beat Estimates, View Raised
AGCO delivered adjusted earnings per share of $3.97 in third-quarter 2023 compared with the prior-year quarter’s $3.18. The reported figure beat the Zacks Consensus Estimate of $3.27.
Including one-time items, AGCO posted an EPS of $3.74 compared with the year-ago quarter’s $3.18.
Revenues increased 10.7% year over year to $3,456 million in the September-end quarter. The top line missed the Zacks Consensus Estimate of $3,474 million. Excluding the favorable currency-translation impact of 3.5%, net sales rose 7.2% year over year.
We predicted net sales to increase by 10.9% in the quarter, excluding the impacts of currency translation. Our model predicted a 1% unfavorable impact of currency translation.
Operational Update
Cost of sales increased 5.8% year over year to $2,522 million in the third quarter. The gross profit increased 26.4% year over year to $934 million in the reported quarter. The gross margin was 27% compared with the prior-year quarter’s 23.7%.
Selling, general and administrative expenses were $354 million compared with the year-ago quarter’s $288 million. The adjusted income from operations rose 30.9% year over year to $436 million. The operating margin was 12.6% compared with the year-earlier quarter’s 10.7%.
Segmental Performance
Sales in the North America segment moved up 3.4% year over year to $941 million in the third quarter. The reported figure fell short of our estimate of $1,018 million. The segment reported an operating income of $139.8 million compared with the prior-year quarter’s $112.7 million. Our projection for the segment’s operating income was $80 million. The variance was mainly due to increased sales of high-horsepower tractors, combines and application equipment, as well as the effects of positive pricing that offset inflationary cost pressures.
Sales in the South America segment increased 26% year over year to $720 million. We expected the segment’s net sales to be $617 million. The variance was due to higher sales of high horsepower, higher margin tractors and increased sales of Momentum planters. The segment reported an operating profit of $150 million compared with the prior-year quarter’s $108 million. Our estimate for the segment's operating income was $116 million. The upside was driven by higher sales and production and a favorable sales mix.
The EME (Europe/Middle East) segment’s sales were $1,587 million compared with the $1,390 million reported in the year-ago period. The reported figure missed our estimate of $1,591 million. The EME’s operating income was $199 million compared with the year-ago quarter’s $142 million. We predicted EME’s operating income to be $205 million.
Sales in the Asia/Pacific segment were down 16.9% year over year to $208 million. We expected the segment’s sales to be $237 million. Lower sales in Japan fueled the decline. The segment registered an operating profit of $19 million compared with the year-ago quarter’s $33 million. Our projection for the segment’s operating profit was $18 million.
Financial Update
AGCO Corp reported cash and cash equivalents of $681 million at the end of the third quarter of 2023, down from $790 million at the 2022 end. Net cash generated from operating activities totaled $568 million in the quarter compared with $271 million in the prior year.
Guidance
AGCO Corp expects 2023 net sales of $14.7 billion. The company expects improved sales volumes and positive pricing to aid the 2023 results.
The gross and operating margins are expected to be higher than the 2022 reported levels, owing to rising sales and production volumes, as well as the company’s pricing actions to mitigate material and labor cost inflation. The improved profitability is likely to support incremental investments in engineering and other technology to advance AGCO’s precision agriculture and digital initiatives. Considering these, management projects an EPS of $15.75 for 2023, up from the previously disclosed $15.25.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, Agco has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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.