EUR 850.00 For Business Accounts Only

Morningstar | AGCO Updated Forecasts and Estimates from 06 May 2019

Since Klockner-Humbolt-Deutz spun it out in 1990, Agco has acquired more than 30 companies to form the only large public pure-play agricultural equipment company. With a global footprint, Agco sells its products through over 4,200 dealers in approximately 150 countries. It has five principal brands: Challenger, Fendt, GSI, Massey Ferguson, and Valtra. Historically, Agco has focused on the sale of lower-margin tractors rather than high-margin higher-priced harvesting equipment. In response to the increasingly competitive tractor segment, Agco expanded its product portfolio to incorporate grain storage and seed handling machinery with the acquisitions of GSI and Cimbria in 2011 and 2016, respectively.Currently, tractor sales produce 57% of overall company revenue while combine sales make up only 3% of aggregate revenue. The remainder is generated by sales of replacement parts (14%), grain storage and protein systems (10%), hay and forage tools (12%), and application equipment (3%). The trend to diversify away from tractors has continued, with Agco embarking on the development of its all-new Ideal combine platform scheduled for release in 2019. However, no indications at this time suggest this will be a game-changing product. The company further improved its technological prowess with the acquisition in 2017 of Precision Planting Systems, a company that creates solutions to improve seed placement.In developed economies, agricultural productivity is high and rising. While an agricultural arms race exists in these markets, the high penetration of mechanized equipment somewhat limits Agco's upside potential in these core sales regions. Fortunately, global macroeconomic factors play in Agco's favor. Approximately 20% of its revenue is derived from emerging economies, where farm mechanization, caloric intake, and protein consumption are all increasing. Food consumption is outpacing population growth as wealthier, more educated societies become more urbanized. This shift generates the twofold effect of reducing the available stock of farm labor, which drives mechanization, and producing a more affluent society that consumes more food with higher protein content.