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. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  2. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  3. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  4. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  5. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  6. Investing News

    How AT&T Evolved into a Mobile Phone Giant

    A third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
  7. Stock Analysis

    Home Depot: Can its Shares Continue Climbing?

    Home Depot has outperformed the market by a wide margin in the last 12 months. Is this sustainable?
  8. Stock Analysis

    Yelp: Can it Regain its Losses in 2016? (YELP)

    Yelp investors have had reason to be happy recently. Will the good spirits last?
  9. Stock Analysis

    Is Walmart's Rally Sustainable? (WMT)

    Walmart is enjoying a short-term rally. Is it sustainable? Is Amazon still a better bet?
  10. Stock Analysis

    GoPro's Stock: Can it Fall Much Further? (GPRO)

    As a company that primarily sells discretionary products, GoPro and its potential falls right in line with consumer trends. Is that good or bad?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>

You May Also Like

Trading Center