Head-To-Head Survey: PACCAR (PCAR) & AGCO Corporation (AGCO)

PACCAR (NASDAQ: PCAR) and AGCO Corporation (NYSE:AGCO) are both mid-cap auto/tires/trucks companies, but which is the better investment? We will compare the two businesses based on the strength of their profitabiliy, earnings, dividends, risk, valuation, analyst recommendations and institutional ownership.

Analyst Ratings

This is a summary of recent ratings and recommmendations for PACCAR and AGCO Corporation, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
PACCAR 1 8 7 0 2.38
AGCO Corporation 1 11 3 0 2.13

PACCAR presently has a consensus target price of $69.43, suggesting a potential upside of 6.47%. AGCO Corporation has a consensus target price of $63.08, suggesting a potential downside of 6.33%. Given PACCAR’s stronger consensus rating and higher probable upside, analysts clearly believe PACCAR is more favorable than AGCO Corporation.

Dividends

PACCAR pays an annual dividend of $1.00 per share and has a dividend yield of 1.5%. AGCO Corporation pays an annual dividend of $0.56 per share and has a dividend yield of 0.8%. PACCAR pays out 24.7% of its earnings in the form of a dividend. AGCO Corporation pays out 32.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. PACCAR has increased its dividend for 3 consecutive years. PACCAR is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares PACCAR and AGCO Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
PACCAR 8.56% 19.13% 6.27%
AGCO Corporation 1.90% 6.55% 2.62%

Earnings and Valuation

This table compares PACCAR and AGCO Corporation’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
PACCAR $16.97 billion 1.35 $2.36 billion $4.05 16.10
AGCO Corporation $7.48 billion 0.72 $575.50 million $1.75 38.48

PACCAR has higher revenue and earnings than AGCO Corporation. PACCAR is trading at a lower price-to-earnings ratio than AGCO Corporation, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

61.8% of PACCAR shares are held by institutional investors. Comparatively, 84.3% of AGCO Corporation shares are held by institutional investors. 2.6% of PACCAR shares are held by insiders. Comparatively, 16.6% of AGCO Corporation shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Volatility and Risk

PACCAR has a beta of 1.14, meaning that its share price is 14% more volatile than the S&P 500. Comparatively, AGCO Corporation has a beta of 0.92, meaning that its share price is 8% less volatile than the S&P 500.

Summary

PACCAR beats AGCO Corporation on 14 of the 17 factors compared between the two stocks.

About PACCAR

PACCAR Inc (PACCAR) is a technology company. The Company’s segments include Truck, Parts and Financial Services. The Truck segment includes the design, manufacture and distribution of light-, medium- and heavy-duty commercial trucks. The Company’s trucks are marketed under the Kenworth, Peterbilt and DAF nameplates. It also manufactures engines, primarily for use in the Company’s trucks, at its facilities in Columbus, Mississippi; Eindhoven, the Netherlands, and Ponta Grossa, Brazil. The Parts segment includes the distribution of aftermarket parts for trucks and related commercial vehicles. The Financial Services segment includes finance and leasing products and services provided to customers and dealers. Its Other business includes the manufacturing and marketing of industrial winches. The Company operates in Australia and Brazil and sells trucks and parts to customers in Asia, Africa, Middle East and South America.

About AGCO Corporation

AGCO Corporation is a manufacturer and distributor of agricultural equipment and related replacement parts. The Company sells a range of agricultural equipment, including tractors, combines, self-propelled sprayers, hay tools, forage equipment, seeding and tillage equipment, implements, and grain storage and protein production systems. The Company’s segments are North America, South America, Europe/Middle East, and Asia/Pacific/Africa. The Company’s products are marketed under various brands, including Challenger, Fendt, GSI, Massey Ferguson and Valtra. As of December 31, 2016, the Company distributed its products through over 3,000 independent dealers and distributors in more than 150 countries. In addition, the Company also provides retail and wholesale financing through its finance joint ventures with Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank). The Company’s AGCO Power engines division produces diesel engines, gears and generating sets.

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