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AGCO – Market expectations are for Uniform ROA to fall, and management may have concerns about inflationary pressures, product management, and inventory

April 25, 2022

  • AGCO Corporation (AGCO) currently trades below corporate and historical averages relative to Uniform earnings, with a 16.4x Uniform P/E (Fwd. V/E’).
  • At these levels, markets are pricing in expectations for Uniform ROA to fade to 8%, accompanied by 5% Uniform asset growth.
  • Meanwhile, analysts expect Uniform ROA to remain at 12% levels through 2023, accompanied by 4% Uniform asset growth.
  • If sustained going forward, these levels would imply a stock price closer to $223, representing significant potential equity upside for the firm. That said, given the cyclicality of the industry, the firm is unlikely to sustain peak performance.
  • Moreover, the firm’s most recent earnings call suggests management may have concerns about inflationary pressures, product management, and inventory.
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