Agco (AG) reported a nice quarter and drove up my agricultural equipment pick CNH Global (CNH) today so I took a bit off the table in that name as well - nothing major, just about $5K. I have been debating adding this Agco to the portfolio for a few weeks, and after looking at the earnings report it still remains a viable candidate. However, after today's run up it trades at 23x 2008 estimates versus CNH Global's 18x for just about the same growth rate. (however these 2008 estimates are incorrect across the board). So I will see how the stocks react on the next downturn, and if Agco provides a nice entry point can build a position there, otherwise I will just add to CNH Global on future pullbacks. I still like fertilizer more than equipment as I believe its more 'protected' from any sort of global slowdown.
Some color on the Agco quarter
- Agricultural equipment distributor Agco Corp. said Tuesday its third-quarter profit surged on strong global demand for farm machinery and a lower tax rate.
- Net income for the three months ended Sept. 30 rose to $76.9 million, or 80 cents per share, compared with $5.4 million, or 6 cents per share, during the same period a year earlier. Excluding restructuring and other unusual items, the company said earnings per share rose elevenfold to 77 cents from 7 cents a year earlier.
- Analysts surveyed by Thomson Financial had been expecting earnings of 30 cents per share, on average. Those forecasts typically exclude one-time items.
- Revenue increased to $1.61 billion from $1.18 billion previously. Analysts forecast revenue of $1.37 billion, according to Thomson.
- "Robust global farm equipment markets drove strong sales growth and improved operating results in all four of our geographic segments for the third quarter," Chairman, President and Chief Executive Martin Richenhagen said in a statement.
- Lower tax rates in the United Kingdom and Germany raised Agco's earnings by about $7.4 million, or 8 cents per share.
- The company said it now expects to report 2007 profit in the range of $2.10 to $2.20 per share. In July, Agco said it expected to earn $1.55 to $1.60 per share. Analysts polled by Thomson Financial had been expecting earnings of $1.76 per share, on average.
2 comments:
What do you make of today's action on CF? Is this profit taking and sell on the news? CF has had a great run.
I make, I wish I had sold more at $94 :)
Never like to see reversals like that - the stock had run quite a bit in just over a week pre earnings. Was selfishly hoping for $100 since stocks generally selloff the first time they hit nice round numbers. I think its a nervous market where people know that the stock market should 'not' be here, but we are a country of performance chasing hedge funds and mutual funds who are reluctantly chasing returns. So at the first sign of negative they begin blowing out positions. Or wait, maybe thats just me. Nah, POT and MOS and CF all have had huge runs over past 3-7 days. I mentioned I would not be surprised to see a drop to $80s. I just didnt expect it to be today. But this market has been choppy and a place you want to lock in profits when you have them if you are not in Apple, Google, Baidu or Research in Motion. Everything else appears at risk. I wouldn't mind a pullback in this space although I'd lose some nice unrealized gains.
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