Agco Earnings: Near-Term Ag Demand To Be Pressured, but We See Long-Term Demand Recovering

Agco reported mixed fourth-quarter earnings, as demand continues to slow. We reduced our fair value estimate by 3% to $141 per share (down from $145 previously). Reported figures in the fourth quarter came in below our expectations. Sales declined by 2.5% year on year, while operating margins contracted 160 basis points to 10.3%. South America was the most challenged region, where sales declined nearly 39% year on year. Operating margins came in at nearly 4% versus 20% in the year-ago period. Lower commodity prices have put pressure on performance in South America.