Deere Tops 3Q Profit Forecasts

On the positives, the revenues for the recent quarter significantly topped estimates of $7.17 billion, as per data compiled by Bloomberg Terminal.

Deere & Co., the world’s largest farm equipment maker, reduced its profit forecast for fiscal 2015 as lower crop prices weakened the farm economy.

Deere & Company (NYSE:DE) said it expects production to resume later this week at its John Deere facilities in the Chinese port of Tianjin after huge explosions in the area killed more than 100 people and displaced thousands from their homes last week. Sales in the construction and forestry segment decreased by 13 percent to $1.53 billion.

Net income attributable to Deere & Co. was $511.6 million in the third quarter, down nearly 40 percent compared to the previous year.

Last month Caterpillar (NYSE:CAT) reported weaker-than-expected Q2 sales, citing “severe weakness” in mining, lower oil prices and sluggish sales in China and Brazil. The company expects its equipment sales to fall 21% in FY15 and 24% in the fourth quarter of the same year. “Deere foresees global sales for Construction & Forestry equipment to advance about 2% in 2015, reflecting further economic recovery and higher housing starts in the U.S. Moreover, the company will benefit from improvement in the nonresidential construction sector and new product introduction”. Total revenue for the quarter ended July 31 declined 20 percent to $7.59 billion. Outside the U.S. and Canada, net sales slid 23 percent for the quarter and 26 percent for nine months, with unfavorable currency-translation effects of 12 percent and 9 percent for the periods.

“Nevertheless, all of Deere’s businesses remained solidly profitable…”

Deere shares were off 4 percent to $86.95 in premarket trading. Despite the drop, he said the retailer has seen strong business in its parts and repairs unit as more farmers bring in existing equipment to be fixed. “We aren’t seeing the sales yet”.

According to Allen, the long-term prospects give the company confidence.

Golden said it is that long-term view that Deere must maintain. Population will increase significantly in the next few decades and this move to urbanization requires more construction.