Deere Q1 Profit Down, But Tops Estimates; Cuts 2016 Profit View

(RTTNews) - Agricultural machinery maker Deere & Co. (DE) reported a profit for the first-quarter that declined about 34% from the last year, reflecting the continuing impact of the downturn in the global farm economy as well as weakness in construction equipment markets. Worldwide net sales and revenues for the first quarter decreased 13 percent from the prior year. The company lowered its profit and company equipment sales guidance for fiscal year 2016.

Samuel Allen, chairman and chief executive officer 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."

The company cuts its fiscal year 2016 net income attributable to the company guidance to about $1.3 billion from the prior estimate of about $1.4 billion.

Company equipment sales are now projected to decrease about 10 percent for fiscal 2016 and to be down about 8 percent for the second quarter compared with the same period a year ago. Included in the forecast is a negative foreign-currency translation effect of about 3 percent for the full year and second quarter.

Previously, the company had expected Company equipment sales are projected to decrease about 7% for fiscal 2016.

Fiscal-year 2016 net income attributable to Deere & Company for the financial services operations is expected to be approximately $525 million. The outlook reflects less favorable financing spreads, an increased provision for credit losses and the unfavorable effects of foreign-currency exchange translation. Additionally, 2015 results benefited from a gain on the sale of the crop insurance business.

Net income attributable to the company for the first quarter ended January 31 2016 decreased to $254.4 million or $0.80 per share, from $386.8 million, or $1.12 per share for the same period of 2015. Analysts polled by Thomson Reuters expected the company to report earnings of $0.70 per share for the quarter. Analysts' estimates typically exclude special items.

Worldwide net sales and revenues for the first quarter decreased 13 percent, to $5.525 billion, compared with $6.383 billion last year. Net sales of the equipment operations were $4.769 billion for the quarter compared with $5.605 billion a year ago. Wall Street expected revenues of $4.94 billion for the quarter.

Net sales of the worldwide equipment operations declined 15 percent for the quarter. Sales included price realization of 2 percent and an unfavorable currency-translation effect of 4 percent. Equipment net sales in the United States and Canada decreased 18 percent. Outside the U.S. and Canada, net sales were down 9 percent, with unfavorable currency-translation effects of 11 percent.

Agriculture & Turf. Sales decreased 12 percent for the quarter due largely to lower shipment volumes and the unfavorable effects of currency translation, partially offset by price realization.

Deere's worldwide sales of agriculture and turf equipment are forecast to decrease by about 10 percent for fiscal-year 2016, including a negative currency-translation effect of about 4 percent. Industry sales for agricultural equipment in the U.S. and Canada are forecast to be down 15 to 20 percent for 2016.

DE closed Thursday's trading at $80.33, down $1.10 or 1.35%.