Ever wonder what became of some of those big-time agricultural equipment companies that passed into history ... names like International Harvester, Case and Massey Ferguson? Well, a Dutch outfit got the first two, but Massey Ferguson was picked up by an American firm headquartered in Duluth, Georgia.
AGCO Corporation (NYSE: AG) is a global manufacturer of agricultural equipment, offering a full product line of tractors, combines, hay tools, sprayers, forage, tillage equipment and implements. The firm markets such brands as AGCO, Massey Ferguson and Fendt through more than 3,200 independent dealers and distributors in over 140 countries. It has acquired Caterpillar (NYSE: CAT)'s high-tech MT series tractor line, as part of a strategy to expand its offerings. Deere (NYSE: DE) is a major competitor.
The firm pleased investors earlier in the week, when it reported Q3 EPS of 77 cents and revenues of $1.61 billion. Analysts
had been expecting 47 cents and $1.36 billion. The CEO said that robust farm equipment markets drove strong sales growth and improved operating results. Management also guided FY07 EPS to $2.10-2.20, versus consensus of $1.77. The share price popped on the news and then moved into a bullish "pennant" consolidation pattern. Stocks frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the shares with one "strong buy", two "buys", six "holds" and a "sell". Analysts see a 48% growth rate, through the next year. The AG Price to Sales ratio (0.85), Price to Book ratio (2.90), Price to Free Cash Flow ratio (18.59), Sales Growth rate (36.58%), EPS Growth rate (1000.00%) and Net Income per Employee ($594k) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $27.67 and $62.95. A stop-loss of $52.70 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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