Deere to Raise Prices as Costs Climb -- Update
May 18 2018 - 10:08AM
Dow Jones News
By Bob Tita and Allison Prang
Deere & Co. is raising equipment prices this year to protect
profit as costs rise.
The maker of farm and construction machinery said on Friday that
profit was up 50% and equipment sales up 34% annually in its latest
quarter, though both figures disappointed analysts. Deere's shares
were slightly lower at the market open.
Rising expenses in recent quarters have weighed on Deere's
performance even as machinery demand picks up. Deere said Friday
that it was still paying more for freight and materials.
Chairman and Chief Executive Samuel Allen said the company will
cut costs and raise prices to protect profit.
Deere joined a host of U.S. manufacturers reporting rising
expenses as a growing U.S. economy drives up prices for materials
and shipping. Prices for steel and aluminum have been pushed up by
U.S. tariffs on imported metal.
The Moline, Ill., company now expects net income of about $2.3
billion for year ending Oct. 31, up from its previous forecast of
$2.1 billion. The company predicts equipment sales will increase by
about 30% this year to $33.7 billion.
Deere forecast a 14% increase this year in sales of its iconic
green and yellow farm machinery and landscaping equipment after
several years of tough sales in its home market. U.S. farm incomes
remain constrained by low commodity prices. Many farmers have been
planting more soybeans in recent years to offset anemic corn
prices.
But the market for U.S. soybeans has grown increasingly
precarious in recent months as China's government threatens to
impose a tariff on U.S. bean exports in retaliation for U.S.
tariffs on Chinese metal and other goods.
Sales of Deere's farm and landscaping machinery rose 22% to $7
billion in the quarter that ended April 29, while profit from the
business rose 5% to $ 1.1 billion.
Deere expects sales for the construction unit to rise by 83%
this year, aided by the addition of German road-paving equipment
maker Wirtgen Group.
On an adjusted basis, Deere said it made $1.03 billion, or $3.14
a share, in the second quarter. Equipment sales were $9.7 billion.
Analysts, though, were expecting the company to earn $3.31 a share
on $9.8 billion in sales.
Write to Bob Tita at robert.tita@wsj.com and Allison Prang at
allison.prang@wsj.com
(END) Dow Jones Newswires
May 18, 2018 09:53 ET (13:53 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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