Deere Shares Punished on Earnings Miss

Deere & Company

the world's largest equipment farm maker announced lower than expected profits. The company also lowered its full year guidance. Deere shares were getting plowed in early-market trading down $6.25 or 7.70 percent to $73.94. Deere projected net income of $3.1 billion for the year compared to $3.3 billion analysts were anticipating according to Thomson Reuters I/B/E/S estimates Despite an 11 percent increase in net income to $788 million or $1.98 a share for the third quarter ending July 31, the figures failed to impress analysts who were looking for $2.32 a share. For the same period last year Deere posted $712.2 million and $11.69 per share. Deere attributed the lower guidance to the draught in the U.S. Midwest, and parts of Asia and South America. "Global economic conditions and dryness in several key markets warrant some caution in coming months," said

A study released by

earlier in the week said farmer income can fall at least 10 percent. For Deere that will affect agricultural equipment sales for the remainder of the year. The report also acknowledged that for large farmers who are insured, tractors sales will be unaffected. Deere also blamed an 11% currency impact due to the strength in the dollar worldwide this year. The company also forecasted international sales for the entire industry to drop 5 to 10 percent for the full year. Deere reported a 15 % net rise in worldwide sales, however if it takes out Canadian sales the increase is unchanged for the quarter and only up 7 percent for the year. “Sales fell short of our expectations due to weakening in certain international markets and short-term manufacturing inefficiencies resulting from the introduction of a record number of new products,” Allen said in the report. In the summery of operations statement Deere was clear to blame “unfavorable currency-transition” on the weaker numbers. But South American sales may be more to blame especially due to Argentina's draught. Also there are visible signs of softening sales in both China and India. Deere's competitor Caterpillar

was trading at $86.58, down 1.5 percent or $1.32 a share. Also agricultural manufacturer AGCO's.

shares were getting hit in earlier trading down over 3 percent to $43.12. Deere shares will continue to fluctuate in a wide and directionless pattern for the foreseeable future. There so many uncertain variables that keep investors from being able to commit long term to the farm equipment sector and specifically Deere.