Market Overview

UBS Cuts AGCO to Sell, Sees '16 Guidance Disappointing

Share:
  • AGCO Corporation (NYSE: AGCO) shares are up 2 percent year-to-date, despite the sharp decline in August from $57.87 to $46.29.
  • UBS analyst Steven Fisher downgraded the rating on the company from Neutral to Sell, while reducing the price target from $52 to $39.
  • Fisher believes that the likelihood of a decline in the company’s earnings in 2016, due to weaker NA prices and a weakening SA market, is not reflected either in the consensus estimates or the stock.

Analyst Steven Fisher said that AGCO’s earnings could decline again in 2016 due to lower corn, soybean and cattle prices in North American as well as a weakening South American market. The likelihood of these headwinds is, however, not reflected either in the consensus estimates or the stock.

“We also see risk of lower machinery prices in 2016. While Europe is AGCO's largest market, we expect flattish revenues and profits, but with a downward bias, due to lower dairy prices and ongoing macro headwinds,” Fisher wrote.

The EPS estimate for 2016 has been reduced from $3.20 to $2.60, to reflect the expectation of lower volumes and pricing. Fisher mentioned that the estimate assumes a 10 percent decline in both NA and SA and a flat market in Europe.

The analyst added that a broad based 1 percent price headwind could result in a 20 percent decline in EPS. The EPS estimate for 2017 has also been reduced from $3.65 to $3, to reflect a lower base year.

In the report UBS noted, “We think AGCO has done a good job of improving manufacturing productivity, procurement, and cost structure in 2015…However, we think AGCO has likely harvested the low hanging fruit, and we think further cost reductions will likely be harder and more costly to achieve.”

Fisher believes that the volume declines next year would have “a more direct negative impact” on the company’s profitability, especially in the NA market.

Latest Ratings for AGCO

DateFirmActionFromTo
Aug 2019Initiates Coverage OnOverweight
Jul 2019DowngradesOutperformMarket Perform
Jul 2019MaintainsUnderweight

View More Analyst Ratings for AGCO
View the Latest Analyst Ratings

Posted-In: Steven Fisher UBSAnalyst Color Downgrades Price Target Analyst Ratings

 

Related Articles (AGCO)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
DEReiterates175.0
AMWDMaintains92.0
FTDRMaintains55.0
REDUDowngrades
ZSDowngrades
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

Slicing And Dicing The S&P 500 With ETFs

Wedbush Says Keurig Green Mountain K-Cups Should Continue To Increase Market Share, Margins Remain Below Branded Bagged Coffee Levels, Lowers PT To $60 From $67