Deere Earnings Helped by Equipment Demand -- Update
November 22 2017 - 9:36AM
Dow Jones News
By Bob Tita
Deere & Co. easily beat quarterly sales and profit
expectations and predicted continued improvement in sales of its
agricultural machinery next year.
Deere said Wednesday it expects better demand in 2018 from
farmers in North America, where it dominates the market for large
tractors and harvesting combines. That would end a stretch of weak
sales since 2014, as low commodity prices and a glut of used
equipment have weighed on demand for new machinery.
Despite another bumper harvest this year that will keep crop
prices and farmers' incomes under pressure, strengthening
industrywide sales of high-horsepower equipment lately show that
some farmers are buying again. Moline, Ill.-based Deere said sales
growth in South America will likely be slower in 2018 following a
recent boom there thanks to record harvests in Brazil.
Deere expects its world-wide farm-equipment sales to increase
about 9% next year, and its sales of farm and construction
equipment to rise 22% in the fiscal year running through Oct. 2018
with the addition of Wirtgen Group, a German road-paving equipment
maker that Deere is buying.
Deere's sales of farm and landscaping machinery soared 22%
during the fourth quarter from the same period a year earlier to
$5.4 billion. Profit for the segment rose 57% to $584 million.
Deere said the improvement stemmed from rising production of
equipment and higher prices. For 2017, farm equipment sales rose 9%
from 2016 to $20.2 billion.
Deere's construction machinery business continued to benefit
from a rebound in the North American machinery market. Construction
swung from a fourth-quarter loss last year to an $85 million
operating profit this year, as sales increased 37% to $1.65
billion. Deere expects sales of its construction and forestry
equipment to increase by about 69% in 2018 with added sales from
Wirtgen.
The $5-billion acquisition, Deere's largest ever, will expand
the reach of its construction machinery business beyond North
America and help offset the cyclical farming business. Deere
expects Wirtgen to contribute $3.1 billion to Deere's sales in
2018, about 12% of the total, and about $25 million in net
income.
"Wirtgen will establish Deere as a substantially more prominent
player in global construction equipment markets," Chief Executive
Sam Allen said.
In all for the fourth quarter, Deere reported net income of with
$510.3 million, or $1.57 a share, compared with $285.3 million, or
90 cents a share, in the year-ago period. Analysts expected the
company to earn $1.47 cents. Over all equipment sales in the
fourth-quarter rose 26% from last year to $7.1 billion, while
analysts anticipated $6.99 billion.
Write to Bob Tita at robert.tita@wsj.com
(END) Dow Jones Newswires
November 22, 2017 09:21 ET (14:21 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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