QUOTE AND NEWS
TheStreet.com  1 hr ago  Comment 
NEW YORK (TheStreet) -- AGCO shares are up 1% to $48.71 on Friday after the farm equipment manufacturer had its rating upgraded to "neutral" from "underweight" by analysts at JPMorgan on Friday. The firm believes that the company's focus on...
Benzinga  5 hrs ago  Comment 
Analysts at JP Morgan upgraded AGCO (NYSE: AGCO) from Underperform to Neutral. The target price for AGCO has been raised from $50 to $51. AGCO shares have dropped 15.53% over the past 52 weeks, while the S&P 500 index has gained 21.89% in...
Benzinga  3 hrs ago  Comment 
SeekingAlpha  Aug 28  Comment 
By Stephen Simpson, CFA: The ag chemical market has slowed, as seen recently at FMC (NYSE:FMC) and DuPont (NYSE:DD), but Taminco's (NYSE:TAM) strong market share and diverse end markets for its alkylamine products are serving the company pretty...
DailyFinance  Aug 26  Comment 
VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 08/26/14 -- Serengeti Resources Inc. (TSX VENTURE:SIR)(FRANKFURT:34S) is pleased to report the results of a field program conducted earlier this summer on its Rottacker property, adjacent to the...
Benzinga  Aug 26  Comment 
Below are the top mid-cap farm & construction machinery stocks on the NYSE and the NASDAQ in terms of return on investment. The trailing-twelve-month return on investment at Joy Global (NYSE: JOY) is 14.20%. Joy Global's EPS for the same period...
Agrimoney.com  Aug 22  Comment 
US farmland prices fall for a ninth successive month, while ag machinery sales activity hits a record low, a survey shows, foreseeing further setbacks
DailyFinance  Aug 22  Comment 
AGCO (NYSE: AGCO), a global leader in the design, manufacture and distribution of agricultural machinery and solutions, announced today that Martin Richenhagen, Chairman, President and CEO of AGCO, was selected as one of 55...
DailyFinance  Aug 21  Comment 
Highlights include: 10.35 metres of 6.77% Zn, 2.31% Pb, 2.19 oz/t Ag at Fatima North and 13.75 metres of 5.74% Zn, 2.76% Pb, 2.89 oz/t Ag at Fatima South VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 08/21/14 -- Trevali Mining Corporation...
DailyFinance  Aug 21  Comment 
VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 08/21/14 -- Argentex Mining Corporation ("Argentex" or the "Company") (TSX VENTURE:ATX)(OTCQB:AGXMF) is pleased to announce the results of the updated National Instrument ("NI") 43-101 compliant...
Agriculture Online  Aug 20  Comment 
in the states of Mato Grosso and Mato Grosso do Sul, corn and soybean growers should be cautious with the variation of rains and weather patterns, according to one ag meteorologist.




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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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