On Thursday, Truist Securities began coverage on shares of AGCO Corporation (NYSE:AGCO), a global leader in the design, manufacture, and distribution of agricultural machinery, with a Buy rating. The firm set a price target for the company at $142.00, citing underappreciated margin improvement potential.
AGCO's joint venture with Trimble and the potential sale of its GSI segment are expected to enhance the company's through-cycle margins by 130-140 basis points (bps). The initial target for these margins was set at 12%, but this did not take into account the effects of portfolio actions. The strategic moves by AGCO, including the globalization of the Fendt product line and the expansion of parts and service offerings, are also anticipated to contribute to margin growth over time.
The analyst from Truist Securities believes that these initiatives will lead to AGCO raising its through-cycle margin target once more during its 2024 analyst day. The company's efforts to refine its portfolio and enhance its global reach are seen as key drivers for the predicted increase in profitability.
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