Deere profit tumbles 40 pct, cuts 4th-qtr sales outlook

Lower crop prices and declining farm incomes continue to hurt demand for John Deere products in the U.S. and overseas.

Deere & Co. (NYSE:DE) lowered its outlook for fourth-quarter sales Friday after reporting weak third-quarter demand for its agricultural equipment.

“There was no real surprise in the numbers”, J.P. Morgan analysts wrote in a research note to clients.

Deere shares fell by 7.9% in early morning trading on Wall Street. After climbing for three weeks through mid-July on speculation that wet weather in the U.S. Midwest would reduce yields, corn prices tumbled again after the Department of Agriculture unexpectedly raised its crop forecast on August. 12.

Deere, the largest seller of tractors and other farm equipment, is dealing with the ripple effects.

“In the Agriculture & Turf Division, lower sales were recorded in all regions of the world”, Deere spokesman Ken Golden said Friday. During the second quarter, construction and forestry equipment sales rose 2 percent and the company was anticipating a 2-percent gain in annual revenues from the segment. Sales contracted 13% amid a pullback in oil drilling and a weaker dollar.

Overall, Deere posted a third-quarter profit of $512 million, or $1.53 a share, down from $851 million, or $2.33 a share, a year earlier.

“John Deere’s third-quarter outcomes mirrored the persevering with influence of the downturn within the farm financial system in addition to decrease demand for development gear”, stated Chief Government Samuel Allen.

However, Deere expects more trouble ahead before the industry turns the corner.

Deere’s sales and profit fell in fiscal 2014, the first drop since fiscal 2009, and led the company to lay off hundreds of workers. Gross sales of farm gear declined 24%. Currency headwinds are expected to hit 4% of full-year earnings and 5% of 4QFY15 earnings.

It is expecting revenue from its forestry and construction equipment to fall, rather that have an increase as it predicted previously, as producers of energy cut their spending amidst the low prices. Monsanto, the world’s biggest seed company, and DuPont Co., whose agricultural Pioneer unit is based in Johnston, have both been plagued by weakness in farm spending.