Deere & Co Cuts Profit Outlook for Full Year
Deere & Co, the largest manufacturer in the world of farm equipment slashed its profit outlook for its fiscal full-year on projections of reduced sales of combines and tractors as farmers expect to face a drop in their income.
Net income for the full-year will be approximately $1.2 billion, said the company, based in Moline, Illinois in a Friday statement. Its previous forecast released in February had net income of $1.3 billion.
However, there was some slightly positive news in Deere’s report. Its equipment sales for the full-year have been changed to project a drop of 9%, rather than a drop of 10% that was forecast earlier.
The farm equipment maker also posted earnings for the second quarter that were better than had been expected.
Industry wide agricultural equipment sales across the U.S. as well as Canada will be lower in 2016 by up to 20%. This is due to the low prices of commodities constraining the spending power of farmers, said Deere.
The company has battled with a glut of inventories of farm equipment stocked up at its many dealerships through slashing jobs and cutting back on overall production.
Sam Allen the CEO at Deere said the company was continuing to put it focus on ways in which it can streamline operations making them more efficient as well as more profitable.
Profit excluding items that are one-off reached $1.56 per share for the three months through the end of April, which beat the analyst estimates of $1.47 per share.
Revenue from equipment fell ending the quarter at $7.11 billion compared to $7.3 billion from the same period one year ago. Deere announced that it is expecting machinery sales during its third quarter to be lower by approximately 12% compared to the same quarter last year.
Shares at Deere were down 0.3% in premarket trading Friday on Wall Street.
A recent price rebound for soybean and corn might give farmers sufficient confidence to begin buying new machinery as the year’s growing season in the U.S. begins.
Soybean futures in Chicago during April entered a bull market due to heavy rains that flooded fields across Argentina, which is amongst the largest exporters in the world.
One analyst said that with the commodity pricing in agriculture at the current levels, there might be some light for the farmers as the majority of commodities prices have increased.
However, many farmers will stay with the equipment they have to start the season, as the uptick in commodities prices recently might only be short-lived.