May 1, 2008 - AGCO Corp.'s (AG-NYSE) annual harvests might be smaller than those of larger rivals John Deere and CNH Global, but it's still able to reap profits worldwide. AGCO sells its tractors, combines, hay tools, sprayers, forage equipment, and replacement parts through a global network of more than 3,200 independent dealers and distributors. The company also offers financing services to some customers and dealers through a joint venture with Netherlands-based Rabobank. AGCO sells its products in more than 140 countries.

AGCO just released first quarter's earnings. They were 63 cents a share, up from 26 cents a share last year in the same quarter and well ahead of analysts' expectations of 47 cents a share. Sales grew to $1.79 billion from $1.33 billion. The agriculture equipment company lifted its 2008 earnings guidance to $3.00 to $3.15. The projected increase in earnings is expected to result from net sales growth of between 20% and 22% compared to 2007. Analysts predict $3.85 for 2008.

You may not know the name AGCO, but it sells machinery worldwide under the names of AGCO, AgcoAllis, AgcoStar, Challenger, Farmhand, Fendt, Fieldstar, Glearner, Glencoe, Hesston, Lor'Al, Massey Ferguson, New Idea, RoGator, SisuDiesel, Soilteq, SpraCoupe, Sunflower, Terra-Gator, Tye, Valtra and White & Willmar. In 2007, sales were higher internationally than domestically with 59% coming from Europe, Middle East and Africa, 16% from South America, and 3% from Asia/Pacific. North America was only 22% of the mix.

There's good reason to believe AGCO's growth will continue. Populations are growing; many countries have increased affluence; and biofuels are in ever higher demand. Put together that means farmers are getting better prices for commodities and income boosts. Some of the new wealth will be spent on upgrading equipment. AGCO's best sellers are in its tractors, combines, harvesting equipment, sprayers and other agriculture machinery.

Management isn't resting on its good fortune. Heavy expenditure in Research and Development will contribute to enhance and expand distribution of its high-tech core brands such as Massey-Ferguson, Challenger, Fendt and Valtra. Sales efforts are focused on larger, corporate farms as well as Europe, central Asia and Russia. It's also working on higher productivity and cost efficiencies. The company already employs Lean Manufacturing and Six Sigma management programs to help profitability. Now its imprementing Process Improvement Strategy, a specific program to the company's operations. Expect even higher quality, better asset utilization and cost efficiency when it's fully implemented.

More numbers: Return on equity was 12.1% last year. Look for 13.5% this year and 15% next year. Sales are projected to grow at 10.5% a year, on average, over the next 5 years while earnings should increase by 24.5% a year, on average, in the same time period. Net profit margin was 3.6% in 2007. Analysts predict 3.9% this year and 4.3% next year. Current assets are 1.3 times current liabilities.

AGCO recently traded at an all-time high of $71.90 a share. It's now down about 20% from there. With earnings growth well above average, this stock should warrant more time from investors looking to benefit from the ever growing agricultural demands worldwide. But watch out for the stock's volatility. With a beta of 1.50, it moves up and down about 50% more than the market.

- Company Web site: www.agcocorp.com

- Ted Allrich