Contending with slumping machinery sales, Deere earnings top estimates
Firm lowers forecast, braces for farm, construction equipment slow-down
MOLINE, Ill.—Deere’s fiscal first-quarter performance beat Wall Street’s expectations, even as the company continues to deal with weak sales of farm and construction equipment. The agricultural equipment maker lowered its full-year forecast.
Deere has been contending with slumping agricultural machinery sales for some time. Falling commodity prices have made farmers less likely to buy new equipment. Declining oil prices have also affected its construction equipment sales. In November the company announced that it was laying off about 220 workers.
But Deere has been effectively managing its costs. In the first quarter, total costs and expenses declined to US$5.17 billion from $5.82 billion.
For the period ended Jan. 31, Deere & Co. earned $254.4 million, or 80 cents per share. That compares with $386.8 million, or $1.12 per share, a year earlier.
This beat the 71 cents per share that analysts surveyed by Zacks Investment Research expected.
Revenue for the Moline, Illinois-based company totalled $5.53 billion, topping the $4.79 billion that Wall Street forecast.
Sales for the agriculture and turf unit dropped 12 per cent in the quarter. Construction and forestry division sales fell 23 per cent.
For fiscal 2016, Deere now anticipates equipment sales declining about 10 per cent and earnings of approximately $1.3 billion. Its prior guidance was for equipment sales to fall 7 per cent and earnings to come in at about $1.4 billion.
The company predicts equipment sales will drop approximately 8 per cent in the second quarter.
Its shares fell $1.33, or 1.7 per cent, to $79 in premarket trading.