Deere Shares Punished on Earnings Miss
Deere & Company (NYSE: DE), the world's largest equipment farm maker, announced lower-than-expected quarterly profits Wednesday. The company also lowered full-year guidance. Deere shares dropped in early-market trading down more than seven percent.
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, the figures failed to impress analysts that were looking for $2.32 a share. For the same period last year, Deere posted net income of $712.2 million or $1.69 per share.
Deere attributed the lower guidance to the drought in the U.S. and parts of Asia and South America. "Global economic conditions and dryness in several key markets warrant some caution in coming months," said CEO Samuel R. Allen in a statement.
A study released by Langenberg & Company earlier in the week said farmer income could fall more than 10 percent in the remainder of the year. For Deere, that may affect agricultural equipment sales. The report also acknowledged, though, that for large farmers who are insured, tractors sales would be unaffected.
Deere also blamed an 11 percent currency impact due to the strength in the dollar worldwide this year. The company forecasted international sales for the entire industry to drop 5 to 10 percent for the full year.
Moreover, Deere reported a 15 percent revenue increase for the year ended July 31. However, without Canadian sales, revenue was only up 7 percent for the year and was unchanged for the third quarter. “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 statement.
Deere also blamed “unfavorable currency-transition” on the weaker numbers. But South American sales may also be 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 (NYSE: CAT) was trading down around 0.6 percent for the day. Agricultural manufacturer AGCO's. (NYSE: AGCO) shares were getting hit, down over 3 percent in early trading.
Deere shares may continue to fluctuate in a wide and directionless pattern for the foreseeable future. A plethora of uncertain variables have kept investors from committing long term to the farm equipment sector, specifically Deere.
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