Plowing Into Farm-Equipment Makers

Following better-than-expected results last week from DuPont (DD), Dow Chemical (DOW) and Potash (POT), I said that I was warming to the shares of agricultural-equipment makers. The logic was that high commodity prices multiplied by greater acreage means good things for farm income. Generally speaking, when farm incomes are high, farmers tend to replace ag equipment. Well, this morning both AGCO (AGCO) and CNH Global (CNH) reported quarterly results and both were stronger than expected on the top and bottom lines.

More specifically, AGCO reported earnings of $1.19 per share -- far better than the consensus forecast of $0.88 per share -- on better-than-expected revenue of $2.4 billion. The company benefitted from strong demand in Brazil, North America and Asia, with softness in Europe that is expected to continue. That outlook for Europe is likely to restrain growth at AGCO if only because the company derives roughly half its sales from that region. AGCO did confirm my take from last week when it described the North American agricultural equipment market: "The trends that have increased demand for grains and lowered global grain inventories are expected to intensify, supporting healthy long-term fundamentals for the agricultural industry."...303 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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