Deere & Co., the largest agricultural-equipment maker, posted lower-than-expected sales and reduced its full-year revenue outlook after shipping less machinery while the dollar weakened against other currencies.
Equipment sales in the fiscal second quarter through April dropped to $9.25 billion from $10.3 billion a year earlier, the Moline, Illinois-based company said today in a statement. That trailed the $9.65 billion average of 12 analysts’ estimates compiled by Bloomberg.
For the full fiscal year, equipment revenue will be down about 4 percent, Deere said, more than a previous projection for a drop of about 3 percent. The maker of tractors and harvesters cited a negative impact of about 1 percent from swings in the value of the U.S. dollar against other major currencies, without elaborating.
Deere said that while the agricultural economy is “relatively healthy,” lower farm incomes are affecting sales of larger machinery in particular. Corn prices are down over the past year after a record U.S. harvest and net farm cash income will drop 22 percent in 2014, according to a projection from the U.S. Department of Agriculture.
“The decline in shipments was the result of the overall weakening in the agriculture market as well as lower production,” Lawrence T. De Maria, a New York-based analyst for William Blair & Co. who recommends selling the shares, said by phone. “The outlook on agriculture in the second half of 2014 is weakening.”
Costs were hurt by a transition at production lines to make tractors and harvesters that meet more stringent emission standards, Tony Huegel, Deere’s director of investor relations, said on a conference call today.
“That could cause delays when you ship to the dealer as you change your production lines,” Matt Arnold, a St. Louis-based analyst for Edward Jones & Co. who recommends buying the shares, said by phone.
Deere fell 2 percent to $91.70 at the close in New York, the biggest decline since January.
Second-quarter net income fell to $2.65 a share from $2.76 a year earlier, beating the $2.49 average analyst estimate. Deere maintained its forecast for full-year net income of about $3.3 billion.
Agricultural machinery sales accounted for 78 percent of Deere’s revenue in 2013 while construction and forestry made up 16 percent, data compiled by Bloomberg show.
Deere forecast construction and forestry sales will climb 10 percent in the full year on a recovery in U.S. housing. Caterpillar Inc., the world’s largest maker of construction equipment, last month doubled its 2014 sales growth forecast for building equipment to 10 percent.