AGCO Corporation (NYSE: AG - News) reported first quarter EPS of $0.63, above our estimate at $0.54, due to greater-than-expected profitability in the South America and EAME regions. Even though North America reported a first quarter loss, we expect a profit rebound in the second half of FY08 on the back of favorable currency translation and double-digit sales growth.
The international growth story remains intact; the global demand for biofuels and animal protein should result in record corn plantings and increased farm equipment purchases. We reiterate our Hold recommendation on shares of AG. Our target price is $63.50, which is 18.6x our 2008 estimate of $3.42.
Currently, AGCO's stock is trading at a P/E multiple of 17.3x our 2008 EPS estimate of $3.42. The company trades at a premium to its peers, CNH Global NV (NYSE: CNH - News) and Deere (NYSE: DE - News), based on its higher long-term growth rate.
We believe AGCO's 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. Zacks.com
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment