AGCO (AGCO) To Gain From Acquisitions, Increased Investments

On Aug 14, we issued an updated research report on AGCO Corporation (NYSE:AGCO) . The company is poised to benefit from increased investments through capital expenditures and engineering spend. Its focus on acquisitions and cost-reduction efforts will also drive growth.

In the second-quarter conference call, AGCO raised its net sales guidance to around $8 billion for 2017. The raised guidance highlights improved sales volumes, positive pricing and acquisition impacts. It also displays the benefits of AGCO’s efforts to reduce expenses, raise efficiency of factories, invest in new technologies, productivity enhancements and roll out products.

The company also lifted its earnings per share target for 2017 to around $3.00. It guided third-quarter 2017 earnings per share to be about 65–70 cents per share. It reaffirmed capital expenditure guidance range of $200–$225 million and free cash flow band of $225–$250 million in 2017.

Further, AGCO continues to make strategic investments to refresh and expand its product lines, upgrade system capabilities and improve factory productivity. The company intends to increase the level of investment to execute its product development plans, resulting in increased capital expenditure and engineering spend in 2017.

The pending acquisition of Precision Planting equipment business from The Climate Corporation – a subsidiary of Monsanto Company (NYSE:MON) – will boost AGCO’s Precision Planting technology. Additionally, the Lely and Kepler Weber acquisition are anticipated to drive growth.

AGCO has an estimated long-term earnings growth rate of 13.51%. Other stocks in the same industry are Deere & Company (NYSE:DE) with expected long-term earnings growth rate of 9.17% and Altra Industrial Motion Corp. (NASDAQ:AIMC) with expected long-term earnings growth rate of 8%.

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