In spite of several industry headwinds, AGCO (AGCO – Analyst Report) managed to deliver a solid ‘beat and raise' on July 28. This led to a flurry of positive earnings estimate revisions, which sent the stock to a Zacks Rank of 1 (Strong Buy).

AGCO, which makes agricultural equipment like tractors and combines, is facing significant challenges from falling commodity prices and lower farm incomes, in addition to a strong dollar. But the company has managed well in a difficult operating environment, cutting costs and “controlling what it can”.

Second Quarter Results

AGCO delivered a solid ‘beat and raise' on Tuesday, July 28. Earnings per share for the second quarter came in at $1.25, crushing the Zacks Consensus Estimate of $1.02.

Net sales fell 25% year-over-year to $2.069 billion versus the consensus of $2.077 billion. Sales were down 25% year-over-year. However, unfavorable currency translation accounted for 14 percentage points of the decline. Excluding forex, net sales declined 11%.

Sales were down at a double-digit clip in every geographical region, including its largest market – Europe/Africa/Middle East – which saw sales drop 25% (17 percentage points of which was due to forex). Sales of both tractors and combines were lower year-over-year.

Nonetheless, solid cost management and lower material costs drove better-than-expected margins in the quarter.

Estimates Rising

Despite the difficult operating environment, management actually increased its full year EPS guidance. The company now expects 2015 EPS of “approximately” $3.10, up from “approximately” $3.00. Net sales guidance remained the same at $7.7-$7.9 billion.

This prompted analysts to revise their EPS estimates higher, sending the stock to a Zacks Rank #1 (Strong Buy). The 2015 Zacks Consensus Estimate is now $3.10, in-line with guidance and up from $2.93 before the report. The 2016 consensus has climbed from $2.99 to $3.08 over the same period.