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AGCO Scales New 52-Week High: What's Driving the Stock?

Zacks Equity Research

Shares of AGCO Corporation AGCO scaled a fresh 52-week high of $71.61 on Apr 8, before closing the day at $71.45. Forecast-topping performance in fourth-quarter 2018 and an encouraging 2019 outlook have contributed to this rally.

AGCO has a market cap of roughly $5.4 billion. The company has an expected long-term earnings per share growth rate of 14.4%, higher than the industry average of 8.9%.  Also, AGCO surpassed the Zacks Consensus Estimate in the trailing four quarters, recording average positive earnings surprise of 59.3%.

Notably, the stock has gained 15.3% in the last three months, higher than the S&P 500’s gain of 10.9%. AGCO has also significantly outperformed the industry’s growth of 4.8%, during the same time frame.

Further, AGCO carries a Zacks Rank #3 (Hold) and a VGM Score of A. Here V stands for Value, G for Growth and M for Momentum. The company’s score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. In fact, our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3, make solid investment choices.

Driving Factors

AGCO reported fourth-quarter 2018 adjusted earnings per share of $1.31, up 19% year over year. The reported figure surpassed the Zacks Consensus Estimate of $1.23. Revenues of $2,592 million were up 2.6% year over year and came ahead of the Zacks Consensus Estimate of $2,574 million.

The company is consistently making strategic investments to enhance and expand product lines, upgrade system capabilities and improve factory productivity. In a bid to execute its product-development plan, and meet the latest emission requirements in Brazil and Europe, the company intends to maintain its level of investment this year. Notably, its spending plan for the ongoing year will support long-term business growth.

Meanwhile, AGCO has reaffirmed its net sales 2019 outlook at $9.6 billion, owing to improved sales volumes and positive pricing. It anticipates gross and operating margin to improve from the 2018 level, backed by positive impact of pricing and cost reduction. Considering these, the company expects 2019 earnings to come in at around $4.60 per share.

Additionally, AGCO forecasts industry demand in South America to improve this year from the prior-year level. Backed by favorable wheat prices and crop production, farm economics will likely improve modestly across Western Europe in the current year, leading to relatively stable demand in European markets. Additionally, the company is focused on its long-term capital allocation plan by returning cash to shareholders.

Notably, the Zacks Consensus Estimate for AGCO’s 2019 earnings is currently pegged at $4.67, reflecting year-over-year growth of 20%. The same for 2020 stands at $5.39, indicating a year-over-year rise of 15.5%.

AGCO Corporation Price and Consensus

AGCO Corporation Price and Consensus | AGCO Corporation Quote

Stocks to Consider

A few better-ranked stocks in the Industrial Products sector are DXP Enterprises, Inc. DXPE, Lawson Products, Inc. LAWS and Albany International Corp. AIN, each sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

DXP Enterprises has an expected earnings growth rate of 21.6% for 2019. The company’s shares have gained 14.8%, over the past year.

Lawson Products has an outstanding projected earnings growth rate of 102.5% for the current year. The stock has appreciated 26.3% in a year’s time.

Albany International has an estimated earnings growth rate of 44.7% for the ongoing year. The company’s shares have gained 12.1%, in the past year.

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