In an effort to increase its product offering in the professional farming sector, manufacturer and distributor of agricultural equipment, AGCO Corporation (AGCO) signed a letter of intent to form a joint venture with Amity Technology, LLC to develop and distribute air seeding and tillage equipment. The transaction is expected to close by the end of 2010.
Per the agreement, AGCO will acquire a 50% interest in selected air seeding and tillage product lines currently sold under the Amity, Wil-Rich and Wishek brand names. The work will be based in Fargo, North Dakota. Products will be manufactured and distributed under the existing brand names as well as selected AGCO brand names going forward.
Till date in November, AGCO has also inked two other deals to expand its product offerings. The company agreed to acquire the remaining 50% stake in Laverda S.p.A from the Italian ARGO Group for €65 million to expand its harvesting business. Also, the company agreed to acquire Sparex Holdings Ltd and its trading subsidiaries from Rubicon Partners Industries LLP for £53 million in order to grow its parts business.
In third-quarter 2010, one of the company’s closest peer, Deere Company (DE), announced to sell its wind energy business, John Deere Renewables, LLC, to Exelon Corp.’s (EXC) wholly owned subsidiary, Exelon Generation Company for $900 million as the wind business was not in line with Deere’s core set of businesses.
AGCO reported solid third-quarter 2010 results, beating the Zacks Consensus Estimate as well as the year-ago figure on the back of stringent cost control, higher production, and record sales and operating income in South America.
On the third quarter conference call, AGCO guided full-year 2010 revenue to range from $6.7 billion to $6.8 billion. Earnings are expected to range between $2.10 and $2.20 per share.
The Zacks Consensus Estimate for fourth-quarter 2010 is 75 cents per share. For full years 2010 and 2011, the Zacks Consensus Estimates are, respectively, $2.19 and $2.82.
We expect the company’s continuous efforts to boost its product offering to result in a higher top-line going forward.
We maintain our Neutral recommendation on AGCO Corporation. The quantitative Zacks #2 Rank (short-term Buy rating) for the company indicates upward pressure on the stock over the near term.
Headquartered in Duluth, Georgia, AGCO Corporation is a manufacturer and distributor of agricultural equipment. AGCO offers a full product line including tractors, combines, hay tools, sprayers, forage, tillage equipment and implements.
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