Deere & Co. Q3 Profit Declines, Yet Tops View; Trims Forecast

(RTTNews) - Agricultural machinery maker Deere & Co. (DE) reported Wednesday a decline in third-quarter profit as net sales were hurt by weak agricultural equipment results due to slowdown in farm economy. Earnings per share, however, topped market estimates. Further, the company trimmed its forecast for fiscal 2014 earnings and equipment sales.

Samuel Allen, chairman and chief executive officer, said, "Deere's third-quarter performance reflected moderating conditions in the global farm sector, which have negatively affected demand for farm machinery and contributed to lower sales and profits for our agricultural-equipment business."

Net income attributable to Deere declined 15 percent to $850.7 million or $2.33 per share from prior year's $996.5 million or $2.56 per share.

On average, 21 analysts polled by Thomson Reuters expected the company to report earnings of $2.20 per share for the quarter. Analysts' estimates typically exclude special items.

The decline for the quarter was due primarily to the impact of lower shipment volumes, higher production costs primarily related to engine-emission requirements, and the unfavorable effects of foreign currency exchange.

Net income attributable to John Deere Capital Corp. increased on growth in the credit portfolio, partially offset by a higher provision for credit losses, and higher expenses.

Deere's worldwide net sales and revenues decreased 5 percent to $9.50 billion from $10.01 billion in the prior year. Total net sales of the equipment operations declined 6 percent to $8.72 billion. Wall Street analysts had a consensus revenue estimate of $8.75 billion.

Net sales included price realization of 2 percent. Equipment net sales in the United States and Canada decreased 8 percent, while sales were down 4 percent outside the U.S. and Canada.

In the quarter, Agriculture and turf sales and revenues dropped 11 percent due largely to lower shipment volumes. Construction and forestry's sales grew 19 percent with higher shipment volumes and price realization, and that of financial-services increased 12 percent.

Looking ahead for fiscal 2014, Deere now expects attributable net income to be about $3.1 billion, compared to previous forecast of about $3.3 billion.

Company equipment sales are now projected to decrease about 6 percent for fiscal 2014 and to be down about 8 percent for the fourth quarter. The previous forecast was for company equipment sales to decrease about 4 percent for fiscal 2014.

According to Allen, Deere's full-year earnings are forecast to be somewhat lower than last year, but the firm is looking forward to completing another successful year and continues to believe the longer-term outlook for its businesses holds considerable promise.

Deere's worldwide sales of agriculture and turf equipment are now forecast to decrease by about 10 percent for 2014, compared to earlier estimated decline of about 7 percent,

Sales of construction and forestry equipment are still expected to increase by about 10 percent.

In pre-market activity, Deere shares were losing $0.49 or 0.57 percent, and trading at $85.99.