Mid-cap farm machinery business AGCO Corporation (AG) is being kept at a Hold rating this morning, according to the latest research report from Zacks senior machinery analyst Mario Ricchio. Here's some of what it has to say:
AGCO Corporation reported first quarter EPS [earnings per share] of $0.26, well above our estimate at $0.05, due to better-than-expected profitability in Brazil and a lower interest expense. The rebound in South America continued for the second consecutive quarter, with sales up 34%.
For the remainder of FY07, we expect higher South American sales amid an upward rise in soybean prices. Given the first quarter earnings surprise, continued debt reduction, favorable currency translation and a further rebound in Brazil, we are raising our FY07 EPS estimate to $1.65 from $1.36. We recommend investors hold shares of AG in their portfolio.
While the company is undertaking several initiatives to drive future productivity, these strategic initiatives are a drag on near-term EPS growth in the form of increased engineering expenses. Excluding the positive impact from debt refinancing, the rest of the operating items add approximately $35 million to costs in FY07. If it were not for increased investment spending, our EPS forecast would have been higher.
Read the analyst report on AG
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