Deere Q2 Results Exceed Expectations, Provide Upbeat Outlook

Deere & Company DE announced a 28.3 percent drop in net income for the second quarter, hurt by 8 percent fall in the top line. However, earnings, as well as revenue came in above the expectations. The company also provided upbeat outlook for the fiscal year 2016.

Deere reported net income of $495 million compared to $690.5 million while earnings fell 23.2 percent to $1.56 a share from $2.03 a share in the year-ago quarter. This is $0.08 a share higher than the Street estimations of $1.48 a share.

Its total net sales and revenues fell 8 percent to $7.88 billion from $13.4 billion in the previous year quarter. This was more than $1 billion from the Street predictions of $6.71 billion. Total net sales were $7.11 billion, down 9 percent from $11.88 billion in the same quarter last year.

Deere's chairman and CEO, Samuel Allen, commented, "John Deere's second-quarter performance reflected the continuing impact of the downturn in the global farm economy and further weakness in the construction equipment sector. In the face of challenging market conditions, Deere's businesses benefited from the sound execution of operating plans, the strength of a broad product portfolio and our success creating a more flexible cost structure."

Moving ahead, the company projected its equipment sales to fall about 9 percent for fiscal 2016 and to be about 12 percent lower for the third quarter than the year-ago periods. The outlook included negative impact from the foreign currency. It estimated net income attributable to be about $1.2 billion for the fiscal year 2016. Street estimate the top line to fall 10.3 percent.

Allen added, "Although our forecast calls for lower results this year in light of ongoing market pressures, Deere is continuing to perform at a much higher level than in previous downturns. Deere's financial condition remains strong and we believe the company is well-positioned to capitalize on attractive growth opportunities that will deliver value to our customers and investors in the future. At the same time, we are continuing to focus on ways to streamline our operations and make them more efficient and profitable."