Deere lowers its fiscal year outlook

Deere lowers its fiscal year outlook

Full-year equipment sales projected to decline 9%.

by Mario Parker

Deere & Co., the world’s biggest farm equipment manufacturer, lowered its fiscal full-year profit outlook on projections for reduced sales of tractors and combines as farmers face a decline in income.

Full-year net income will be about $1.2 billion, Moline, Illinois-based Deere said in a statement Friday, compared with the $1.3 billion it forecast in February. But there was also some slightly more positive news in the report: full-year equipment sales are now projected to decline about 9%, instead of an earlier forecast of about 10%. The company also posted better-than-expected second-quarter earnings.

Deere

Industrywide sales of agricultural equipment in the U.S. and Canada will be as much as 20% lower this year as low commodity prices constrain farmers’ spending power, Deere said. The company is battling a glut of farm-equipment inventories stocked up at dealerships by eliminating jobs and cutting production.

“We are continuing to focus on ways to streamline our operations and make them more efficient and profitable," Chief Executive Officer Sam Allen said in the statement

Profit excluding one-time items was $1.56 a share in the three months through April, beating the $1.47 average of 19 estimates compiled by Bloomberg. Equipment revenue dropped to $7.11 billion from $7.4 billion a year earlier. Deere said it expects third-quarter machinery sales to be about 12% lower than the same period a year ago.

The shares fell 0.3 percent to $81.99 at 7:09 a.m. in pre-market trading in New York.

A recent rebound for corn and soybean prices may give farmers enough confidence to start buying machinery again as this year’s U.S. growing season gets under way. Soybean futures traded in Chicago entered a bull market last month as heavy rains flooded fields in Argentina, among the world’s top exporters.

“With agricultural commodity pricing at these levels, I could see that giving them some light,” Kwame Webb, an analyst at Morningstar Inc., in Chicago, said by phone Thursday. “Most of the ag commodities have taken a step up. Everyone wants to know what that means for order boards in North America.”’

To contact the reporter on this story:

Mario Parker in Chicago at [email protected]

To contact the editors responsible for this story:

Simon Casey at [email protected]

© 2016 Bloomberg L.P

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