Sector Snap: Farm Equipment

Wachovia Capital Markets analyst Andrew Casey said that based on recent checks with equipment dealers, North American demand for the machines continues to outpace supply and most manufactures are sold out for this year.

At the same time, the companies have been able to pass along rising steel and shipping costs to their customers and used equipment prices remain strong.

"In general, despite damaging short-term Midwest weather conditions, the long-term agricultural equipment outlook has strengthened," Casey wrote in a note to investors.

The analyst said that dealers remain confident that farmers will buy equipment as long as corn prices, which currently sit at about $7.32 per bushel, don't fall below the $5 to $6 per bushel range.

Casey upgraded Duluth, Ga.-based Agco Corp. to "Outperform" from "Market Perform" and boosted his valuation range to $63 to $66 from $60 to $63, citing a recent pull back in the company's share price and the long-term crop price outlook.

Not surprisingly, Agco posted some of the day's largest gains, surging $4.85, or 9.1 percent, to $58.36 in afternoon trading after peaking at $59 earlier in the day. Over the past 52 weeks, the company's shares have traded between $36.66 and $71.95, and are off 21 percent since the start of the year.

Casey also maintained his "Outperform" rating for Deere & Co. Its shares gained $2.89, or 3.7 percent, to $80.81 after reaching $81.22 earlier. Over the past 52 weeks Deere's shares have traded between $56.96 and $94.89.

Elsewhere in the sector, shares of CNH Global NV added $2.05, or 5.1 percent, to $42.55.