The downturn in the farm economy, as well as weaker construction sales, pushed total equipment sales 22% lower during the company’s fiscal third quarter.
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Deere is expecting sales for the full year in its agriculture and turf segment to drop by 25%, which is one percent worse than what it had expected last May, as dropping incomes on farms made it harder for farmers to buy. Revenues also surpassed the Street’s estimates, standing at $7.59 billion, but representing a decline of 20% YoY. The company said equipment sales are projected to decrease about 21 percent for fiscal 2015, revised down from 19 percent forecast in the previous quarter.
Deere & Company (NYSE:DE) traded down 8.257% during trading on Wednesday, hitting $83.165.
“Farmers have cut spending amid lower crop prices”, Karen Ubelhart, a Bloomberg Intelligence analyst, said in a report on August 12. Construction unit revenue will decline about 5 percent, compared with the prior forecast for a gain of about 2 percent, largely because of the weaker North American energy industry, the company said.
Analysts at Goldman Sachs warned that Deere’s comments signal another negative year for agriculture equipment sales in 2016.
Net income for the year through October will be about $1.8 billion, the Moline, Illinois-based company said Friday in a statement. Worldwide sales of construction and forestry equipment are forecast to be down about 5 percent for the year. “Unfavorable growing conditions in any key region of the world, as well as known impacts from any geopolitical tensions, could disrupt trade, lower production, reduce the stocks-to-use ratio and result in commodity prices moving higher”. Supply kept coming out at $90, keeping a lid on the advance until demand overcame it. Prices have pulled back to the breakout point.
According to Allen, the long-term prospects give the company confidence.
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Low grain prices remain a concern, Golden said. “The long-term view is on the macro trends that will require more food and more construction all around the world. When we view those things, we still have a long-term positive view and believe they play right into John Deere’s sweet spot of agriculture and construction”.
