Agricultural equipment manufacturer and seller AGCO International (NYSE:AGCO) reported that first quarter 2012 profits jumped 50% thanks to a continued strong demand for the company's products. During the first quarter ending Mar. 31, 2012, AGCO reported net income of $120 million, or $1.21 a share compared with a net profit of $80 million, or 81 cents a share, in the first quarter of 2011. Revenue during the quarter rose about 26% to $2.27 billion from $1.8 billion a year ago.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

Farming Profits
Shares in AGCO jumped roughly 6% as the earnings report surpassed analysts' earnings per share estimates of 86 cents a share, on revenue of $2.1 billion, respectively. Strong demand for the company's tractors, combines and other farm related equipment fueled the company's growth. Despite a pullback in agricultural commodity prices, corn prices remain attractive which helps boost farming profits. AGCO also benefited from its acquisition of GSI in 2011 which gave the company a foothold in grain storage, a fast growing segment of the overall agricultural industry. Acquisitions helped boost sales growth by about 11% but absent that growth, organic sales grew by an impressive 19.4%. While the strongest growth coming from the Middle East and Asia. AGCO also delivered strong growth results in Europe, which is not an easy task these days.

SEE: Surprising Earnings Results

Sunny Days Ahead
In addition to a pleasant quarterly report, AGCO said that 2012 full year results would exceed expectations. The company continues to invest capital in product development, and the company expects global industry sales to grow modestly in 2012. As a relatively small player, AGCO's growth should exceed the overall industry. It is near a $5 billion market cap company compared with over a $33 billion for industry giant Deere (NYSE:DE) and almost $66 billion for titan Caterpillar (NYSE:CAT). AGCO also trades for less than 9 times earnings compared with over 12 for Deere. Its closest peer maybe Netherlands based CNH Global (NYSE:CNH), approximately an $11 billion maker and seller of farm equipment. CNH trades for almost 11 times earnings.

SEE: Understanding The P/E Ratio

The Bottom Line
Overall, agricultural equipment demand should remain fundamentally stronger going forward, at least for AGCO. AGCO is targeting adjusted earnings per share of approximately $5.50 for the full year of 2012. Net sales are expected to range from $10.2 billion to $10.5 billion for the full year.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Sham Gad did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  2. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  3. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  4. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  5. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
  6. Professionals

    Tips for Helping Clients Though Market Corrections

    When the stock market sees a steep drop, clients are bound to get anxious. Here are some tips for talking them off the ledge.
  7. Stock Analysis

    The Safest Stocks You Can Invest in Right Now

    These stocks are likely to hold up better than others in a bear market, but there's a twist.
  8. Investing Basics

    5 Reasons to Expect Lower Stock Returns

    Lower stock returns are likely here to stay for some time. Here are five reasons why.
  9. Investing Basics

    What to Cut From Your Portfolio Right Now

    Owning stocks may shortly become too scary for your portfolio. Here's why, and here are some alternatives.
  10. Personal Finance

    Careers: Equity Research Vs. Investment Banking

    Equity research is sometimes viewed as the unglamorous, lower-paid cousin to investment banking. In this article, we compare the two careers.
RELATED TERMS
  1. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  2. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  3. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  4. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  5. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
  6. Impact investing

RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!