Deere & Co. (DE) Stock Falls on Lower Forecast

Shares of the Deere & Co. (DE) were trading off -1.21 or -1.32 percent to $90.50 per share in Friday's premarket after the company announced first quarter earnings early this morning. The company reported better than expected earnings, but its outlook for equipment sales was lowered for the rest of the year. Deere & Co. stock closed at $91.71 per share, down -1.04 or -1.12 percent in Thursday's regular trading session.

Founded in 1837, Moline, Illinois based Deere & Company is the world's largest manufacturers of farm equipment and agricultural machinery, as well as heavy equipment for forestry and construction.
The company also manufactures diesel engines and drive trains for use in heavy equipment. The company employs over 67,000 people, primarily in Canada and the United States and also provides financial services under the John Deere brand name. Deere & Co. operates manufacturing facilities in Canada, Mexico, Germany, the Netherlands, Finland, Brazil, India and France as well as manufacturing plants in several of the United States.

The company announced net income of $368.8 million or $1.12 per share for the company's first quarter ended on January 31st. This compares to net income of $681.1 million or $1.81 per share in the same period one year ago. Analysts expected the company to earn $0.82 per share in the first quarter.

Total revenue from worldwide sales dropped to $6.383 billion in the quarter, versus $7.654 billion last year, a decline of -19 percent. Net sales from equipment operations declined to $5.605 billion compared to $6.949 billion in the first quarter of 2014. Analysts predicted the company would report worldwide sales of $6.09 billion and equipment sales of $5.49 billion for the first quarter.

The better than expected earnings were in large part due to strength in construction and forestry machinery sales, which offset weakness in its agricultural products. Farm equipment sales were under significant pressure due to falling agricultural commodity prices and weak demand.

Deere & Company Chairman and Chief Executive Officer, Samuel R. Allen said in the company's press release that, "Deere's first-quarter performance reflected sluggish conditions in the global farm sector, which reduced demand for agricultural machinery, particularly larger models, and led to lower sales and income. At the same time, our construction and forestry and financial services divisions had higher profits, showing the benefit of a well-rounded business lineup. Deere's results also demonstrated the progress we've made creating a more flexible, responsive cost structure."

The company revised its outlook for equipment sales for its full fiscal year from a -15 percent decline to -17 percent, with sales for the second quarter expected to decline by -19 percent compared with the same period one year ago. The figures include a negative currency translation effect of approximately -3 percent for the full year and -4 percent for the second quarter. Net income for the entire 2015 year is now expected to be around $1.8 billion.

Allen continued saying that, "Even with a continued pullback in the agricultural sector, John Deere expects to remain solidly profitable in 2015. Our forecast reflects a level of results much better than we've experienced in previous downturns. This illustrates our success establishing a wider range of revenue sources and a more durable business model."

Deere & Company stock is trading at the higher end of its yearly range. This morning's selloff does not look significant, in large part due to quarterly earnings beating analyst forecasts. Also, last week Warren Buffet's Berkshire Hathaway announced it had taken a $1.51 billion stake in the company, purchasing 17.1 million shares of the company in the third quarter of 2014. As market conditions and the world economy begin improving, Deere stock will probably continue to be a sound investment.

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Published on Feb 20, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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