Deere Earnings Helped by Equipment Demand -- 2nd Update
November 22 2017 - 1:02PM
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 on Wednesday said 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, rising industrywide
sales of high-horsepower equipment lately show that some farmers
are buying again.
"Replacement demand is appearing to come back," said Tony
Huegel, Deere's director of investor relations. Deere shares
recently traded up 4.2% to $145.14, after touching a one-year high
of $146 earlier in the day.
Moline, Ill.-based Deere expects its world-wide farm-equipment
sales to increase about 9% and its overall sales of farm and
construction equipment to rise 22% in the fiscal year running
through October 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 to $5.44 billion, while profit for the
segment rose 57% to $584 million. Deere said the improvement
stemmed from rising production of equipment and higher prices. For
fiscal 2017, farm-equipment sales rose 9% to $20.17 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 rose 37% to $1.65 billion.
Deere expects sales of its construction and forestry equipment to
jump 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 sales in fiscal 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, a year earlier. Analysts expected the company to
earn $1.47 a share.
Quarterly equipment sales rose 26% to $7.09 billion, while
analysts anticipated $6.99 billion.
Write to Bob Tita at robert.tita@wsj.com
(END) Dow Jones Newswires
November 22, 2017 12:47 ET (17:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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