AGCO, Deere Down On Farm, Gildan Not Gold-an

CROP PACE CRUSHES FARM EQUIPMENT
AGCO (AG) dropped an earnings bomb on a market that was already mad at everything about the farm economy, up to and including the weather. And it’s paying a hefty price in Tuesday’s trading. After flirting with its best levels of the year, the maker of Massey Ferguson tractors, and the second-largest farm-equipment maker in the U.S., wrenched its forecasts for the year lower. The company said that sales would prove a lot more robust than Wall Street had been forecasting - revenues could be six or seven percent ahead of estimates for the year - but that the top line wouldn’t fall to the bottom line, as it planned to make some investments in strategic initiatives. Wrong day to say something disappointing. Investors came into the session with a head of steam against the farm-equipment names, after a report from the Department of Agriculture said that the pace of crop plantings has been well off the norm. Due to rainy weather at the start of the planting season, fewer than 10% of the corn crop is in the ground as of this weekend, a point on the calendar when, in the average year, about a third of the crop would have been planted. Given that the pace of crop plantings is expected to approach - though not eclipse - the record realized last year, there is little margin for error. Shares of some of the other farm-equipment stocks have had a tough session, as well. CNH Global (CNH), which lost 18% in a single session last week after posting a second-quarter profit disappointment, has declined again, while Deere (DE) is looking anything but doe-eyed. Kind of a bummer for Titan International (TWI), which makes wheels and tires for tractors. The company posted quarterly results that showed it swung to a profit as its fiscal second-quarter sales surged 28%. Nevertheless, the stock is trading lower in sympathy with the sector.

GILD-ING THE DISAPPOINTMENT
Gildan Activewear (GIL) had a pretty good little story to tell. Dominant position in its market, which is making t-shirts. A North American market that was actually growing in demand. An international pipeline. A relatively cheap source of labor, which controlled costs. Plus a gnarly chance to see the logo of the Eagles reunion tour splashed across one of its products. It’s a story that our Barrons Online colleague Alex Eule told readers about two weeks ago. However, what the company didn’t know, or hadn’t disclosed, was some problems in its textile production coming out of a Dominican production facility. Gildan admitted on Tuesday that the textile shortfall would prevent it from capitalizing on strong demand trends in the back half of the year. It forecast full-year earnings coming in at $1.45 to $1.50, versus the $1.90 that the company and the Street had been forecasting. Gildan will post its formal quarterly profit statement May 7.