AGCO Corp. (NYSE: AGCO) reported Q3 EPS of $2.09, $1.11 better than the analyst estimate of $0.98. Revenue for the quarter came in at $2.5 billion versus the consensus estimate of $2.14 billion.

Third Quarter Highlights

• Reported regional sales results(1): Europe/Middle East (“EME”) 22.7%, North America 8.6%, South America 14.4%, Asia/Pacific/Africa (“APA”) 25.2%
• Constant currency regional sales results(1)(2): EME 18.9%, North America 9.1%, South America 48.5%, APA 21.3%
• Regional operating margin performance: EME 13.3%, North America 10.0%, South America 6.1%, APA 10.1%
• Year-to-date free cash flow increased over $309 million from the first nine months of 2019
• Funding position improved with net debt below September 2019 levels
• Raised full-year outlook for net sales and net income per share

(1) Increase (decrease) as compared to third quarter 2019.

(2) Excludes currency translation impact. See reconciliation in appendix.

“AGCO’s third quarter results were highlighted by sales growth and margin expansion across all regions,” stated Martin Richenhagen, AGCO’s Chairman, President and Chief Executive Officer. Our focused operational performance allowed us to ramp up production and recover from supply chain interruptions experienced in the second quarter. During the third quarter, we made significant progress towards fulfilling our strong order board while reducing dealer and company inventory levels. We have strong order boards heading into the fourth quarter, however, we still face a demanding environment to manage our manufacturing, supply chain and aftermarket operations. I would like to thank all our employees again for their extraordinary efforts to support our dealers and customers under these challenging conditions. AGCO is also maintaining its planned funding levels supporting premium technology, smart farming solutions and enhanced digital capabilities in 2020. These investments are delivering new features and functionality across our product portfolio which positions us to improve our global market position and profitably grow our business.”

“Harvests are progressing ahead of schedule in the northern hemisphere and global crop production is on track for a record year despite the ongoing COVID-19 pandemic,” continued Mr. Richenhagen. “Global grain consumption is recovering, consistent with improving economic activities and increased grain exports to China. Following reduced forecasts for ending grain inventories, soft commodity prices have risen in the third quarter, which is positive for farm economics.”

“Global industry demand for farm equipment is now expected to be relatively flat in 2020 versus 2019 with improved demand in North and South America offsetting lower demand in Europe,” continued Mr. Richenhagen. “Industry retail tractor sales in North America increased in the first nine months of 2020 compared to the same period in 2019. Growth in the sales of low horsepower tractors was partially offset by weaker industry demand for high horsepower tractors. The fleet age for large equipment remains extended as replacement demand continues to be deferred in the North American market. Industry retail sales in Western Europe decreased in the first nine months of 2020 due primarily to COVID-19 related production constraints. Market demand was weakest in the United Kingdom, France and Spain, and was partially offset by growth in Germany which has benefited from tax incentives during 2020. The negative impact of lower wheat harvests across most of Western Europe was mostly offset by stronger grain export demand and supportive wheat prices. European dairy and livestock fundamentals have stabilized after weakening earlier in the year. South America industry retail tractor sales increased during the first nine months of 2020, with growth in Brazil and Argentina partially offset by weaker demand in the smaller South America markets. Strong crop production in Brazil and Argentina, as well as favorable exchange rates are supporting positive economics. Farmers are replacing their aged fleet following years of soft demand due to economic weakness and challenging political environments.”

GUIDANCE:

AGCO Corp. sees FY2020 EPS of $5.00, versus the consensus of $3.92. AGCO Corp. sees FY2020 revenue of $8.9 billion, versus the consensus of $8.4 billion.

• The health, safety and well-being of all AGCO employees, dealers and farmer customers continues to be AGCO’s top priority during the COVID-19 pandemic. The following outlook does not contemplate any further sales or production disruptions caused by the pandemic.
• Net sales in 2020 are expected to be approximately $8.9 billion reflecting relatively flat end-market demand, the unfavorable impact of currency translation, offset by the benefit of positive pricing. Adjusted operating margins are expected to be improved from 2019 levels due to positive pricing and expense reductions. Based on these assumptions, 2020 adjusted net income per share, excluding the impact of restructuring expenses and the non-cash goodwill impairment charge, is targeted at approximately $5.00.

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