North America Boosts AGCO Shares

Feb 20, 2008 (Zacks Investment Research via COMTEX) -- CNH | news | PowerRating | PR Charts -- AGCO Corporation (AG) reported fourth quarter EPS of $0.82, above our estimate at $0.60, due to a lower-than-expected loss in North America and greater-than-expected profitability in South America and the EAME region. In FY08, we expect North America to be profitable on account of record combine and tractor purchases. The growth story remains intact; the global demand for bio-fuels and animal protein should result in record corn plantings and increased farm equipment purchases. Our FY08 EPS estimate of $3.05 is above management guidance. We are more bullish on North America, where we believe record corn and wheat prices should lead to higher tractor and combine purchases. We expect North America to turn a profit this year, compared to a loss posted in FY07. Currently, AGCOs stock is trading at a P/E multiple of 21.1x our 2008 EPS estimate of $3.05. The company trades at a premium to its peers, CNH Global NV (CNH) and Deere and Company (DE), based on its higher long-term growth rate. We believe AGCOs 2008 EPS will benefit from higher prices, a return to profitability in North America, continuous strong growth in South America, and continued strength in the EAME region. Nevertheless, the stock has factored in the bulk of the earnings recovery expected this year. We do retain our Hold recommendation on shares of AG. In our view, the target price of $66 per share, based on 21.6x our 2008 EPS estimate of $3.05 adequately reflects the bulk of the improving fundamental story.Read the full analyst report on AG.Read the full analyst report on CNH.Read the full analyst report on DE. nbsp;

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