QUOTE AND NEWS
Southeast Farm Press  8 hrs ago  Comment 
USDA U.S. agricultural cooperatives set a new sales record in 2013, with total business volume of more than $246 billion, surpassing the previous record set in 2012 by $8 billion.This third consecutive year of record sales reflects...
Agrimoney.com  Oct 8  Comment 
Grains manage gains, and in particular corn, helped by US acreage fears and some decent demand signs. But other ags fail to exploit a weaker dollar
SeekingAlpha  Oct 8  Comment 
By Aviate: By now, it’s no surprise that the machinery and agriculture segment of the market is suffering from a number of headwinds. The risk of a CapEx holiday is growing. AGCO (NYSE:AGCO) stated that during the third quarter they "experienced...
StreetInsider.com  Oct 7  Comment 
The following is a list of notable articles to help get you through the lunch hour: Facebook (FB) Opens Audience Network to All Developers -> Read this! Upgrades to Apple's (AAPL) iOS 8 Flatline -> Read this! Traders Eye Kandi Technologies...
TheStreet.com  Oct 7  Comment 
NEW YORK (TheStreet) --aAGCO shares are down 6.8% to $43.88 on Tuesday after the agricultural equipment manufacturer provided third quarter EPS guidance that is below analysts expectations for the period. The company expects to earn between...
Agrimoney.com  Oct 7  Comment 
Shares in the maker of Fendt machinery plunge after it lowers its earnings guidance for a second time, in the latest sign of sector weakness
MarketWatch  Oct 7  Comment 
Shares of Agco tumbled 7.6% in premarket trade Tuesday, after the agricultural equipment company cut its profit outlook for the year because of weaker-than-expected demand. Agco cut its full-year outlook to $4.10 to $4.30 a share from a previous...
Southeast Farm Press  Oct 6  Comment 
Tony Randolph was named AGCO Application Equipment’s 2013 Operator of the Year for his relationship-building skills with farmer customers and his attention to detail in understanding the challenges of their fields. He is known to invite...
SeekingAlpha  Oct 6  Comment 
By Asif Suria: Welcome to edition 224 of Insider Weekends. Insider buying increased last week with insiders buying $72.32 million of stock compared to $30.92 million in the week prior. Selling decreased with insiders selling $432.89 million of...
SeekingAlpha  Oct 3  Comment 
By InsiderInsights: Dollar value is only one metric to assess the significance of an insider transaction, but when high dollar value intersects with significance it spotlights a stock investors should take the time to consider. InsiderInsights...




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AGCO (NYSE: AGCO) is the 3rd largest manufacturer of agricultural equipment world-wide. The company makes products such as tractors and combines, and distributes its products through a network of dealers and distributors to the farmers.[1] The company earned $6.6 billion in revenue and $136 million in net income in 2009.[2]

Since AG generates nearly all of its revenue from sales of agricultural equipment, much of its success hinges upon the health of the agriculture industry and crop prices. One current trend that may play to AG's advantage is the increased interest in corn-based ethanol. Ethanol-based energy research and development over the next several years could lead to continued growth in demand for corn and, of course, the tools needed to plant and harvest more of it. Increasing demand for food in developing countries could also positively impact AG's sales. As both populations and personal incomes grow in emerging markets, demand for both grains and grain intensive products such as meat should increase as well. With three-quarters of its revenue generated outside of the U.S., AG has greater exposure to developing countries than any of its competitors.

Company Overview

AGCO primarily makes tractors, combines, and other agricultural equipment:[3][4]

  • Tractors (66% of sales): the company sells its tractors under a variety of brand names including AGCO, Challenger and Massey Ferguson. Its sizes range from compact tractors (used on small farms), utility tractors (used on small and medium-sized farms), and high horsepower (used on larger farms and on cattle ranches).
  • Combines (5% of sales): are used to harvest various grain crops. AG's combines come with a variety of crop-harvesting heads for different kind of crops.
  • Application Equipment (4% of net sales): self-propelled 3 or 4 wheeled vehicles and equipment such as chemical sprayers which are used in the application of fertilizers and crop protection chemicals.
  • Other Products (10% of net sales): the company makes a wide range of other products such as mowers and tools used to cut hay.
  • Replacement Parts (14% of net sales): in addition to new equipment, AG sells replacement parts for their products. These parts keep farm equipment in use, including products no longer in production.

Business Growth

FY 2009 (ended December 31, 2009)[2]

  • Net sales decreased 21% to $6.6 billion. The company attributes the decline to net sales decreases in most of its geographical regions as well as unfavorable foreign currency translation impacts
  • Net income decreased 61% to $136 million.

Trends and Forces

Alternative Energy & Biofuels drive up Corn Prices

The USDA anticipates ethanol production to top 12 billion gallons annually by 2016, derived from over 4 billion bushels of corn. This would represent an increase of 168% from the estimated 1.6 billion bushels of corn used in ethanol production in 2005. This be accompanied by significantly higher corn prices, which would combine with the increased production to result in more revenue for farmers. Due to the increased demand for corn and higher prices, many farmers might use their increased income to make large investments such as purchasing new farm equipment like tractors and harvesters.

Emerging Markets Buy More Grain

AGCO is much more focused on emerging markets than peers such as Deere & Company (DE). The company generates over 75% of its revenue outside of the US, while Deere & Company (DE) generates only 30%. These countries are experiencing rapid economic development, which has fueled increased demand for food and energy. The interest in biofuels has extended beyond North America to emerging economies such as Brazil.

For example, AG's exposure to the Brazilian market (South America - mostly Brazil - accounts for around 15% of its revenues) could be a growth driver. Brazil makes ethanol from sugar cane, instead of corn. There are 47 new sugar cane mills being built in Brazil, and each one will require about 100 new tractors. AGCO has 60% market share in the Brazilian tractor market, and a dominant position in the sugarcane industry.

Competition

AG faces tough competition from a variety of competitors across the globe, but its two primary competitors are Deere & Company (DE) and CNH Global N.V. (CNH).

* Deere & Company (DE): is the world's leading manufacturer of agricultural and forestry equipment. The company currently generates 70% of its sales from the US and Canada.

* CNH Global N.V. (CNH): CNH is a leading player in the agricultural equipment market and the construction equipment industries, from the Netherlands.

References

  1. AGCO 2009 10-K "General" pg. 1
  2. 2.0 2.1 AGCO 2009 10-K "Selected Financial Data" pg. 18
  3. AGCO 2009 10-K "Products" pg. 1-2
  4. AGCO 2009 10-K "Notes to Consolidated Financial Statements" pg. 100
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