What happened
Shares of tractor maker Agco (AGCO 1.06%) plowed ahead on Tuesday morning, up 7.5% as of 10:15 a.m. ET after shredding Wall Street's best guess at what it would earn in the fourth quarter of 2021.
Heading into the quarterly profits report, analysts had forecast this agricultural equipment stock would earn $1.77 per share (pro forma) on sales of $3.1 billion. In fact, the company reported today that it earned $3.08 per share on sales of $3.2 billion -- 74% better than forecast.
Image source: Getty Images.
So what
But in fact, the news was even better than that. Thanks to "the reversal of a valuation allowance previously established against the Company's deferred tax assets in Brazil," management said, when calculated according to generally accepted accounting principles (GAAP), Agco's profit for the quarter was not $3.08 per share, but $3.75 per share. That was more than twice the $1.78 per share (GAAP) that Agco earned a year ago.
Q4 sales grew 16% year over year.
For the full year, sales grew 22% to $11.1 billion, and earnings per share were $11.85 -- also up 110% over last year's $5.65 per share profit.
Now what
Commenting on the results, Agco CEO Eric Hansotia observed that his company enjoyed "significantly higher sales and margins [in 2021] compared to 2020 ... despite considerable supply chain challenges." And Agco's hoping to do nearly as well in 2022.
"AGCO's net sales for 2022 are expected to be approximately $12.3 billion," predicted management, with "gross and operating margins ... projected to improve from 2021 levels" as well. Earnings per share are expected to be approximately $11.50.
Granted, it's not entirely good news to hear Agco promise 11% sales growth but a 3% decline in profit. But in the absence of the "reversal of a valuation allowance" that boosted Q4 2021 profits, management's 2022 prediction still sounds pretty good -- and Agco's valuation at 11 times current year earnings looks attractive.
