The worldwide manufacturer and distributor of agricultural equipment, AGCO Corporation (AGCO) announced that its Fendt 828 Vario tractor has set a record for fuel efficiency – an all-time low of 245 grams per kilowatt hour – which is 19% below the industry average. This is a testimony to AGCO’s incessant efforts to develop new products to meet new engine emission standards.
The test was conducted by PowerMix at the DLG Test Centre in Germany, the recognized authority for European agricultural machinery fuel consumption testing. AGCO’s products are widely recognized in the agricultural equipment industry and Fendt is among its well-known brands that also include Challenger, Massey Ferguson and Valtra.
The Fendt tractor is powered by a new Selective Catalytic Reduction (SCR) stage 3b /Tier IV interim compliant engine. SCR engines have been used in Europe for more than five years in on-road applications. The SCR engines provide a competitive edge in terms of improved fluid economy, reliability and durability as well as ensuring lesser exhaust emissions for a cleaner environment. Fendt’s new 800 Vario series incorporates Fendt’s efficient technology platform as well as the SCR technology to deliver improved performance and fuel economy.
AGCO’s adjusted fourth-quarter EPS more than doubled to 88 cents from 42 cents in the year-ago quarter, beating the Zacks Consensus Estimate of 76 cents. Total revenue improved 19% to $2.17 billion, outperforming the Zacks Consensus Estimate of $2.02 billion, driven by sales growth in Americas and Europe/Africa/Middle East (EAME), partially offset by a decline in the Rest of the World.
For fiscal 2011, AGCO is targeting an adjusted EPS in the range of $2.50 to $2.75. Revenue is estimated to come in a band of $7.6 billion to $7.9 billion. AGCO anticipates flat worldwide industry demand for its products in 2011. The revenue growth rate for the year is envisioned at 10% to 15%, driven by a favorable exchange rate, accretive acquisitions and market share gains.
However, AGCO expects higher expenses for new product and divergent market development. For 2011, AGCO apprehends a 10–15% increase in engineering expense for new product development and tier 4 emission requirements.
The United States Department of Agriculture forecasts farm income to increase 19.8% in 2011 compared with 2010, despite a $20 billion jump in production expenses. The 2011 forecast is the second highest inflation-adjusted value for net farm income recorded in the past 35 years. AGCO stands to benefit from rising farm income, which will surely reflect in its 2011 results.
With a full product line of farm equipment and a wide network of dealers and distributors, we believe AGCO is well positioned to capitalize on the need for increased food production driven by worldwide population growth over the long term as well.
Moreover, the company is also looking to expand operations in high-growth emerging markets, which bode well for future operating performance. We currently have a Zacks #3 Rank (short-term Hold recommendation) on the stock.
AGCO Corporation is a leading manufacturer and distributor of agricultural equipment and related replacement parts. Its product line is categorized under five groups: tractors, replacement parts, combines, application equipment/sprayers and other machinery.
The company operates in four geographical segments: Europe/Africa/Middle East (EAME), South America, North America and Asia-Pacific. AGCO competes with CNH Global NV (CNH), Deere & Company (DE) and Kubota Corporation (KUB).
AGCO CORP (AGCO): Free Stock Analysis Report
CNH GLOBAL NV (CNH): Free Stock Analysis Report
DEERE & CO (DE): Free Stock Analysis Report
KUBOTA CORP ADR (KUB): Free Stock Analysis Report
Zacks Investment Research
