Agco highlighted a surge in South America's farm equipment market as the maker of Fendt tractors raised its hopes for 2010 earnings, but losses in both Europe and North America sent its shares tumbling 10%.

The group, which also owns the Massey Ferguson brand, raised its target for earnings per share for the full year from $1.55-65 to $1.65-75, and hardened expectations for revenues.

Sales would come in at worst at $6.7bn, $100m above its previous bottom-of-the-range forecast.

The improvements followed a January-to-March period in which Agco lifted South American sales by 68% to $377.3m, ahead of industry growth, as the region's farmers prepared for a record soybean harvest and strong corn crop.

"In Brazil, market demand was near record levels," Martin Richenhagen, the Agco chairman, and chief executive, said, noting also "solid commodity prices [and] generous government financing programmes".

European weakness

However, while South American growth was set to remain "strong", Eastern European and Black Sea markets looked set to suffer "very low" demand for the rest of the year, with Western European conditions soft.

In the first quarter, Agco's Europe, Africa and Middle East division - historically the group's biggest earner - fell into a $3.8m operating loss, on sales down one-third at $612.3m.

"Weak market conditions and dealer destocking resulted in significant sales declines," Agco said, with France, Germany and the UK leading the slide.

The North American division reported an operating loss of $7.3m, on sales down 28% at $282.9m, significantly underperforming a flat market, thanks to lower sales of smaller tractors and measures to lower dealer inventories

Market reaction 

Mr Richenhagen said that the group would place a "major focus" on improving margins for the rest of the year, echoing plans unveiled last week by rival CNH Global, the maker of Case and New Holland tractors.

And the data impressed analysts at broker Sterne, Agee, who raised their target on Agco shares to $42 from $35, crediting the company for a "solid" quarter and saying the worst of its downturn was "now in the rear view mirror".

It dismissed as profit taking the poor reception to the result by the markets, after Agco stock touched $40 on Monday for the first time since October 2008.

The shares closed down 9.7% at $35.92, wiping more than $350m from the company's stock market value.

Wall Street had already factored in better prospects for Agco's earnings, forecasting them as of last night at an average of a little over $1.65 a share.