Deere Earnings Better Than Expected, but Outlook Weakens

Deere & Co. (NYSE: DE) reported first-quarter fiscal 2016 results before markets opened Friday. The farm and heavy equipment maker posted diluted earnings per share (EPS) of $0.80 on revenues of $5.53 billion. In the same period a year ago, the company reported adjusted EPS of $1.12 on revenues of $6.38 billion. First-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.70 and $4.94 billion in revenues.

Year over year, net sales fell 18% in the United States and Canada and 9% elsewhere, and currency exchange rates had a negative impact of 11% on revenues. Lower profits for the quarter were due primarily to lower shipment volumes, the unfavorable effects of foreign-currency exchange and the impact of a less favorable product mix. Lower cost of sales, lower production costs and higher price realizations partially offset the unfavorable factors.

For 2016 Deere expects equipment sales to decline by about 10% and second-quarter sales are forecast to fall 8% compared with the second quarter of 2015. When Deere reported fourth-quarter results in November, the company said it expected equipment sales to fall by 7% compared with 2015 sales.

Net income for the year is now forecast at $1.3 billion, down from a prior estimate of $1.4 billion and from 2015 net income of $1.9 billion.
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CEO Samuel R. Allen said:

John Deere’s first-quarter results reflected the continuing impact of the downturn in the global farm economy as well as weakness in construction equipment markets. At the same time, all of Deere’s businesses remained solidly profitable, benefiting from the sound execution of our business plans and the success of actions to develop a more responsive cost structure. … Although Deere expects another challenging year in 2016, our forecast represents a level of performance much better than we have experienced in previous downturns.

Shares of Deere were down 1.3% in the premarket Friday, at $79.25. The 52-week range is $70.16 to $98.23. Thomson Reuters had a consensus analyst price target of $77.14 before this report.