Deere & Company (NYSE:
), the world's largest equipment farm maker, announced
lower-than-expected quarterly profits Wednesday. The company also
lowered full-year guidance. Deere shares dropped in early-market
trading down more than seven percent.
Deere projected net income of $3.1 billion for the year compared
to $3.3 billion analysts were anticipating according to Thomson
Reuters I/B/E/S estimates
Despite an 11 percent increase in net income to $788 million or
$1.98 a share for the third quarter, the figures failed to impress
analysts that were looking for $2.32 a share. For the same period
last year, Deere posted net income of $712.2 million or $1.69 per
Deere attributed the lower guidance to the drought in the U.S.
and parts of Asia and South America. "Global economic conditions
and dryness in several key markets warrant some caution in coming
months," said CEO Samuel R. Allen in a
A study released by
Langenberg & Company
earlier in the week said farmer income could fall more than 10
percent in the remainder of the year. For Deere, that may affect
agricultural equipment sales. The report also acknowledged, though,
that for large farmers who are insured, tractors sales would be
Deere also blamed an 11 percent currency impact due to the
strength in the dollar worldwide this year. The company forecasted
international sales for the entire industry to drop 5 to 10 percent
for the full year.
Moreover, Deere reported a 15 percent revenue increase for the
year ended July 31. However, without Canadian sales, revenue was
only up 7 percent for the year and was unchanged for the third
quarter. "Sales fell short of our expectations due to weakening in
certain international markets and short-term manufacturing
inefficiencies resulting from the introduction of a record number
of new products," Allen said in the statement.
Deere also blamed "unfavorable currency-transition" on the
weaker numbers. But South American sales may also be to blame -
especially due to Argentina's draught. Also, there are visible
signs of softening sales in both China and India.
Deere's competitor Caterpillar (NYSE:
) was trading down around 0.6 percent for the day. Agricultural
manufacturer AGCO's. (NYSE:
) shares were getting hit, down over 3 percent in early
Deere shares may continue to fluctuate in a wide and
directionless pattern for the foreseeable future. A plethora of
uncertain variables have kept investors from committing long term
to the farm equipment sector, specifically Deere.
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