AGCO AGCO Corp

Agco Corp.'s (AGCO) second-quarter earnings rose 9.6%, as the company's market-leading sales of farm tractors in South America offset lower sales in Europe and the U.S.

Agco easily exceeded its own and Wall Street's earnings expectations for the quarter, sending the company's stock up Tuesday 1.46%, or 49 cents, to close at $34.11 a share.

Agco's sales in South America rose by 98% from a year ago to $448 million. The company's performance in the region benefited from a combination of large harvests, government-sponsored financing for equipment purchases and favorable currency translations.

"Our strong market position in South America is allowing us to take advantage of robust market conditions," said Martin Richenhagen, chairman and chief executive, during a conference call Tuesday with Wall Street analysts. "South America was the key to our results in the second quarter."

Agco, whose brands include Massey Ferguson, Challenger and Fendt, said it now sees industry-wide sales of farm equipment in South American increasing 20% to 25% this year over 2009, up from the company's April forecast of a 10% to 15% increase.

Conversely, the Duluth, Ga., company offered a gloomier outlook for Europe, predicting that industry-wide machinery sales would fall by 10% to 15%, compared with its earlier forecast of a 10% decrease.

Bulging inventories of equipment at dealers in Western Europe and weak markets for livestock and dairy products contributed to 16% decline in Agco's second-quarter sales in the Europe.

In the U.S., expectations for strong harvests and improving farm incomes are driving sales of large farm tractors. But sluggish demand for smaller tractors by dairy, livestock and hay producers caused Agco's North American sales to fall 17% in the second quarter.

Agco, the world's third-largest farm-machinery manufacturer behind Deere & Co. (DE) and CNH Global N.V., expects industry-wide equipment sales in the U.S. to increase 5% this year, slightly better than its April forecast.

Agco raised its 2010 earnings outlook to a range of $1.85 to $2 a share from $1.65 to $1.75 as it affirmed its revenue forecast of $6.7 billion to $6.8 billion. For the second quarter, Agco reported net profit of $62.9 million, or 66 cents a share, up from $57.4 million, or 61 cents a share, a year earlier, which included 3 cents of charges. The company in April had forecast earnings of 40 cents to 45 cents.

Revenue slipped 1.4% to $1.74 billion.

Analysts polled by Thomson Reuters forecast income of 46 cents a share from revenue of $1.68 billion.

-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com

(Nathan Becker contributed to this report)

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