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Agricultural Leader: Analyzing AGCO's Earnings in 2Q16

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Agricultural Leader: Analyzing AGCO's Earnings in 2Q16 PART 1 OF 5

AGCO’s Earnings in 2Q16 Fell Less than Expected

AGCO’s earnings in 2Q16

AGCO (AGCO) is a globally diversified manufacturer of tractors, hay, and forage tools and other equipment for agricultural (DBA) end usage. The company sells its tractors under the Challenger, Fendt, Massey Ferguson, and Valtra brands. AGCO’s market position in North America is overshadowed by the commanding presence of Deere & Company (DE). However, in emerging markets and especially in Brazil the company has an industry leading market share of 50%. AGCO declared its 2Q16 operating results on August 4.

Among its peers, Deere & Company will be declaring its 3Q16 earnings on August 19 for the quarter ending on July 31. CNH Industrial (CNHI) has the second largest market share in North America and the largest share in Europe. It declared its earnings on July 26. Compared to consensus estimates of $0.11, CNH Industrial reported adjusted EPS (earnings per share) of $0.16. CNH Industrial’s agriculture equipment (MOO) business reported a sales decline of 6%.

AGCO&#8217;s Earnings in 2Q16 Fell Less than Expected

AGCO&#8217;s Earnings in 2Q16 Fell Less than Expected

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AGCO’s 2Q16 adjusted EPS

AGCO’s adjusted EPS fell 18.4% year-over-year to $1.02—compared to Wall Street analysts’ estimates of $0.91. The company’s operating income fell 21.6% in 2Q16 due to lower production levels. Global demand for farming equipment waned after a cut back on capital expenditures by farmers. Although prices of some commodities recovered as the year progressed, they’re nowhere near the levels in 2014. This kept a tight lid on farm incomes throughout 1H16. AGCO stock fell 3.9% in response to the company’s earnings and closed at $46.86 that day.

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