Deere Trims Outlook Due to Farmers' Struggles -- WSJ
May 18 2019 - 3:02AM
Dow Jones News
By Bob Tita
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (May 18, 2019).
Deere & Co. lowered its profit and sales forecasts to
reflect slackening demand for its tractors and planters as trade
disputes and bad weather weigh on the incomes of U.S. farmers.
Farmers who buy Deere machinery are being hurt by lower overseas
purchases of U.S. corn, soybeans and other crops as a result of
tariffs on farm commodities, exacerbating a multiyear price slump
after years of bumper harvests.
President Trump earlier this month increased tariffs on billions
of dollars in Chinese products.
Days later, China said it would increase tariffs on billions in
U.S. goods including some agricultural products.
"Further trade progress between the U.S. and China is becoming
increasingly important," Cory Reed, president of Deere's
financial-services business, said on a call with analysts on
Friday.
Shares were down 5.8% in recent trading to $137.52.
Cold, wet weather in the Midwest is also delaying spring
planting, raising questions about how much revenue farmers will
generate this year. The U.S. Agriculture Department estimates just
one-third of the expected corn crop has been planted, compared with
a 66% average for this time of the year.
Deere said that an African swine fever outbreak that has
decimated hog herds in China could also weigh on demand for U.S.
grain, further undermining business for farmers.
Those problems are hurting demand for Deere equipment.
Deere said it would reduce production of farm equipment this
year to lower inventories at its dealerships. Deere expects about
$3.3 billion in profit and a 5% increase in equipment sales this
year, down from previous estimates for $3.6 billion in profit and a
7% rise in equipment sales in 2019.
The Moline, Ill.-based company said weakness in the U.S. was
weighing on its lending arm as well. Deere forecast income from its
financing business this year of about $600 million, down from a
$650 million projection earlier this year. The company raised its
provision for credit losses in the financing business to 0.23% of
the average owned-equipment portfolio, up from 0.17% last quarter
but in line with the 15-year average for the finance business.
For the quarter ended April 28, profit declined 6% to $1.13
billion, or $3.52 a share, compared with $1.2 billion or $3.67 a
share last year. Net sales of equipment rose 5.4% to $10.27
billion. Analysts were expecting $3.59 a share on sales of $10.19
billion.
--Allison Prang contributed to this article.
Write to Bob Tita at robert.tita@wsj.com
(END) Dow Jones Newswires
May 18, 2019 02:47 ET (06:47 GMT)
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