Deere Gives Upbeat Outlook as Earnings Fall--Update
February 17 2017 - 10:55AM
Dow Jones News
By Bob Tita
Deere & Co. raised its sales growth forecast for this year
as the world's largest farm-equipment manufacturer reported
stabilizing demand after years of tumbling sales.
The company topped sales and profit expectations in its fiscal
first quarter with help from the sale of a portion of its
distribution business for landscaping supplies.
The Moline, Ill.-based company offered a surprisingly upbeat
outlook for equipment sales growth, even with continued weakness
expected in the U.S. market that Deere dominates. The company
predicted that sales of its farm and construction machinery will
rise about 4% this year to about $24.3 billion, an improvement from
the 1% expansion forecast in November. The company also bumped up
its net income forecast to about $1.5 billion from $1.4 billion,
implying earnings per share about $4.54. Analysts were expecting
about $4.53.
Deere's revised outlook was driven by what it described as signs
of stability in key markets for farm equipment, especially in Latin
America, where demand has been surging lately. The company said it
now expects sales of its farm equipment to increase by about 3%
this year after earlier predicting a 1% increase.
For the quarter ended Jan. 29, sales of Deere's farm machinery
were flat from a year earlier at $3.59 billion, while operating
income rose 48% to $213 million with proceeds from the sale of a
portion of the SiteOne distribution unit.
Deere predicted industrywide sales of farm machinery in the U.S.
and Canada will fall by 5% to 10% this year. Lower prices for farm
commodities have squeezed farmers' incomes, making them reluctant
to purchase new tractors and harvesting combines. Demand has been
falling since 2014.
Sales of Deere construction and forestry equipment dropped 6%
during the quarter to $1.1 billion as operating income plunged 51%
to $34 million. Despite the dismal start to the year, Deere
forecast construction machinery sales will increase 7% this year,
compared with a 1% increase seen previously. The company expects
the improvement to be driven by moderate economic growth.
Over all for the first quarter, Deere reported a profit of
$193.8 million, or 61 cents a share, down from $254.4 million, or
80 cents, a year earlier. The most recent quarter included a $94
million pretax charge related to employee separation programs.
Net sales fell 1.5% to $4.69 billion. Total equipment sales for
the quarter rose 2% $5.62 billion. Analysts had forecast earnings
of 55 cents with $4.68 billion of equipment sales.
Deere stock was recently up 1.7% at $111.14.
Imani Moise contributed to this article
Write to Bob Tita at robert.tita@wsj.com
(END) Dow Jones Newswires
February 17, 2017 10:40 ET (15:40 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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