AGCO Downgraded By JPMorgan On Weakness In The European Market

JPMorgan has downgraded AGCO Corporation (NYSE: AGCO) to Underweight from Neutral on weak EU agriculture fundamentals and rising dollar, which is expected to weigh on the company's North American business.

"Sentiment is weakening in Europe and, with a pre-buy dynamic in France now behind us, the outlook for the rest of 2016 is bleak across the agriculture sector. We do not expect Europe to offset the weakness in the Americas from here," analyst Ann Duignan wrote in a note.

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Duignan, who cut the price target to $44 from $47, noted that 60 percent of AGCO'S EBIT comes from EAME and another 16 percent from South America, where political and economic instability in Brazil continue to weigh on equipment demand.

Duignan also cut 2016 EPS estimate to $2.20 from $2.34 and 2017 EPS estimate to $2.40 from $2.54.

"While the activist investment (as well as TAFE ownership) increases the potential for strategic actions, we believe the stock is currently overvalued and the risks to earnings are to the downside," Duignan added.

Shares of AGCO closed Friday's regular trading session down 7.50 percent at $48.33; in Monday's pre-market session, shares dropped 2.13 percent to $47.35 at time of writing.