Agricultural Equipment Maker Has Blowout Quarter And Should Be Firmly On Investors' Radar

May. 1.12 | About: AGCO Corporation (AGCO)

AGCO Corporation (NYSE:AGCO) came through with another blowout quarter Tuesday. This marks at least the 13th straight quarter the company has beat estimates, the majority of times by a significant amount like today. Based on the report and the stock's fundamentals, the stock would appear to have significantly more upside.

Key earnings highlights for AGCO:

  • The company posted earnings of $1.21 a share, 35 cents over consensus estimates.
  • Revenues improved a little over 26% Y/Y to $2.27B, over $200m over estimates.
  • Raises FY2012 guidance to $5.50 a share in earnings, significantly over the consensus range of $5.00 to $5.07.
  • Gives revenue guidance $300mm to $600mm above the consensus sales estimate of $9.9B for FY2012.
  • Surprisingly, states strongest growth is coming from Western and Eastern Europe.

4 reasons AGCO is still a buy at under $50:

  • Consensus estimates for FY2012 and FY2013 had already risen over the prior three months. Look for these estimates to be taken up smartly given the earnings beat and guidance.
  • The stock is now selling around 9 times the new guidance for $5.50 EPS in FY2012, this is significantly below its five year average (15.8).
  • The company more than doubled its operating cash flow from FY2009 to FY2011. The stock sells currently for less than 7 times OCF.
  • The stock is a solid Ag play given its five year projected PEG that is under 1 (.68) and it goes for about 50% of annual revenues.

Note: AGCO's blowout earnings and revenues should bode well for its competitor Deere (NYSE:DE) when it reports on May 16th.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AGCO, DE over the next 72 hours.