Deere Cuts Forecast as Wet Weather Slows ConstructionShruti Date Singh
Deere & Co., the world’s largest agricultural-equipment maker, cut its full-year equipment sales forecast after cold, wet weather slowed demand for construction and turf-care machinery in North America.
Equipment revenue will rise by about 5 percent in the year through October, the Moline, Illinois-based company said today in a statement, down from a February forecast of 6 percent. Global construction and forestry equipment sales will drop by about 5 percent, compared with a previous projection for a 3 percent increase. Deere also said the effect of unfavorable foreign exchange will curb sales by about 1 percentage point.
The company maintained its full-year net income forecast of about $3.3 billion, lower than the $3.35 billion average of 16 analysts’ estimates compiled by Bloomberg. Second-quarter profit of $2.76 a share exceeded the $2.72 average of 18 estimates.
The shares fell 4.4 percent to $89.64 in New York, the most since Aug. 15.
“There was an expectation it would be a beat and raise,” Steve Volkmann, a New York-based analyst for Jefferies & Co. who has a hold rating on the shares, said in a telephone interview today.
Deere’s near-term forecast is “tempered” by economic concerns holding back business confidence and growth in parts of the world, Chairman and Chief Executive Officer Samuel Allen said in the statement. Those headwinds may slow the company’s goal to reach $50 billion in revenue by 2018.
North America is Deere’s largest market. U.S. construction spending fell 1.7 percent in March, the second drop in three months, government data show. The euro-area economy shrank more than economists forecast in the three months through March, extending a recession to a record sixth quarter, the European Union said today. Germany expanded less than forecast and France slipped into a recession.
Deere said its net income rose to $1.08 billion in the second quarter through April, from $1.06 billion a year earlier. Revenue rose 9 percent to $10.9 billion in the quarter.
The company’s global farm and turf equipment sales will rise about 7 percent for the full year on high commodity prices and farm incomes. Industrywide farm machine sales will rise about 5 percent in the U.S. and Canada and as much as 20 percent in South America while falling 5 percent in the European Union.