Deere trims outlook on drought, weak economy after 3Q misses Wall Street forecasts
by Samantha Bomkamp, THE ASSOCIATED PRESS
Company cut its revenue prediction for year, investors reacted swiftly
NEW YORK: A slowing global economy and the effects of a prolonged U.S. drought caught up to Deere & Co. in its fiscal third quarter, as net income rose 11 per cent for the world’s largest producer of agricultural equipment but fell well short of Wall Street’s expectations.
Deere cut its revenue prediction for the year, and investors reacted swiftly.
Shares dropped more than 5 per cent before the opening bell.
The ongoing drought in the Midwest, a stronger dollar and costs to introduce a slew of new products hurt the company.
Deere said Wednesday that it earned $788-million, or $1.98 per share, for the quarter ended July 31, compared with $712.3-million, or $1.69 per share, for the same period last year.
Analysts expected $2.31 per share in the most recent quarter, according to FactSet.
Revenue rose 15 per cent to $9.59-billion, missing analysts’ average prediction of $9.61-billion.
Since the company touches many important markets, its earnings report provides a unique look into the state of the U.S. and global economies.
Deere’s earnings have held up better in recent quarters than other U.S. companies that are considered economic bellwethers, such as UPS and 3M.
Sales of tractors and other farm equipment, by far its biggest segment, rose 14 per cent to $7.27-billion.
Deere also makes a wide range of construction and forestry equipment, including backhoes and excavators.
That segment’s sales jumped 23 per cent to $1.66-billion.
Sales from Deere’s financial services segment, where it offers crop insurance, loans and other aid, rose 3 per cent to $565-million.
Deere sees net income of $3.1-billion for the year ending in October, down from $3.35-billion forecast three months ago.
Analysts estimate about $3.4-billion.
In pre-market trading, Deere shares fell $4.23, or 5.3 per cent, to $75.90.
