The company said it expected sales to drop about 11 percent in its first quarter, which began on November 1, and fall about 7 percent for the year. Its shares rose more than 4 percent in premarket trading.
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Weakness in global markets for farm and construction equipment leads to the decline. The report is expected to show a big step down in Deere’s projection that would signal a prolonged slump for the sector, according to the Wall Street Journal.
Agriculture & Turf division sales dropped 25 percent for the quarter, while Construction & Forestry division sales slipped 32 percent for the quarter.
Deere forecast net income attributable to the company at about $1.4 billion, down from $1.94 billion reported for fiscal 2015. The financial services segment finances sales and leases by John Deere dealers of new and used agriculture and turf equipment and construction and forestry equipment.
Deere also faces a glut of used equipment, which could force it to slow production or cut jobs, said Argus Research analyst Bill Selesky. Analysts were expecting earnings of $0.75 per share on revenue of $6.12 billion.
Worldwide net sales and revenue dropped 25 percent to $6.715 billion, while net sales of the equipment operations slipped to $5.932 billion from $8.043 billion. However, Dobre said analysts were expecting an outlook of $1.0 billion and $1.2 billion.
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“Sales and earnings for the year were the sixth-highest in company history, a notable achievement in light of the challenging market conditions we experienced”, CEO Samuel R. Allen stated. Finally, BMO Capital Markets decreased their price objective on shares of Deere & Company from $80.00 to $77.00 and set a “market perform” rating for the company in a report on Monday, August 24th. Shares are down about 14% in the year so far, while the S&P 500 has gained 1.5%.
