Farm Slump Slows Deere's U.S. Sales
August 18 2017 - 10:22AM
Dow Jones News
By Bob Tita
Equipment maker Deere & Co. continues to face headwinds from
the troubled U.S. farm economy.
Deere's farm and construction equipment sales rose 13% in the
company's fiscal third quarter ended July 31, but fell short of
expectations. Deere's shares fell 8.5% to $113.31 in early
trading.
Strong demand abroad wasn't matched in the U.S. and Canada --
Deere's biggest market -- where sales grew 11%. U.S. farmers have
been reluctant to purchase new equipment as a multiyear slump in
grain and livestock prices weighed on their incomes and buying
power. Improving crop yields and forecasts for another bumper
harvest this year have prompted expectations for the fourth
consecutive year of declining U.S. farm incomes.
Across the industry, Deere expects farm-equipment sales in the
U.S. and Canada to fall 5% this year. Still, Deere slightly raised
its profit forecast for its fiscal year ending Oct. 31 to $2.1
billion and said it expects farm and construction equipment sales
to rise 10% overall. Sharply higher sales and profit from Deere's
construction and forestry equipment unit in the second quarter
helped offset lackluster farm-related sales in North America.
Sales elsewhere in the world were more robust, rising 25% in the
quarter. Record harvests and favorable exchange rates have fueled
booming demand for farm equipment in South America, driving much of
that sales gain. Deere expects industrywide equipment sales in
South America to rise 20% this year.
Deere's construction-equipment sales rose 29% from last year to
$1.5 billion, as operating profit more than doubled to $104
million. The Moline, Ill., company said in June that it plans to
purchase German road-paving equipment maker Wirtgen Group for about
$5 billion. The acquisition, the largest in Deere's history, is
expected to expand the reach of its construction business outside
North America.
Overall for the quarter, Deere reported a profit of $641.8
million, or $1.97 per share, compared with $488.8 million, or $1.55
a share, a year earlier. Equipment sales reached $6.83 billion, up
17% from last year. Analysts had expected Deere to earn $1.95 a
share on net equipment sales of $6.92 billion.
Write to Bob Tita at robert.tita@wsj.com
(END) Dow Jones Newswires
August 18, 2017 11:07 ET (15:07 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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