Improving grain production to be the profit driver
In 2011, AGCO Corporation (NYSE:AGCO) merged with the GSI group. A recent GSI dealer’s survey indicates that the demand for grains is expected to increase in the second half of 2013 in North America. The reason for this increase will be a decline in grain prices caused by improved production levels. Weather conditions will facilitate higher production, and this increased production will in turn increase the demand of grain storing equipment. GSI, being a major manufacturer of grain storing equipment, will experience an increase in demand for its products. Thus, it is expected that GSI will contribute at least 10% to the profits of AGCO Corporation (NYSE:AGCO) this year.
In the company’s first quarter results, AGCO Corporation (NYSE:AGCO) reported an increase in the sale of tractors by 13% on a year-over-year basis. It also looks likely that there will be an increase in the demand for its high-quality tractors going forward. To capitalize on this growth opportunity, AGCO Corporation (NYSE:AGCO) announced an expansion plan of its Jackson-based tractor factory. This expansion will increase its tractor production capacity by 25% and will also improve its operational efficiencies. The Jackson expansion will be laid out in seven phases and will require an investment of $42 million between 2013 and 2015. The first phase of the expansion will add 30,000 square feet to the tractor manufacturing area and is expected to be complete by the end of 2013. This expansion will improve AGCO Corporation (NYSE:AGCO)’s overall revenue-generating capacity.
Conclusion:
Terex Corporation (NYSE:TEX) has been awarded almost 30% of the total contracts rolled out by the Department of Defense in June this year. This shows Terex’s comparative advantage over its peers in the cranes segment in the U.S. Also, the increasing demand for equipment on rent will improve the profit margin of Terex Corporation (NYSE:TEX)’s AWP segment.
The joint venture between Manitowoc Company, Inc. (NYSE:MTW) and Shantui Construction Machinery will improve Manitowoc’s future revenue generating capacity.
AGCO Corporation (NYSE:AGCO)’s expansion of its Jackson-based facility will help it to expand its production base in the next three years.
As long-term investments, all three of these stocks are a “buy.”
The article 3 Equipment Manufacturers to Look For in 2013 originally appeared on Fool.com and is written by Shweta Dubey.
Shweta Dubey has no position in any stocks mentioned. The Motley Fool owns shares of Terex. Shweta is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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