Deere Q2 Profit Down Yet Tops View, Cuts FY14 Equipment Sales Outlook

(RTTNews) - Agricultural machinery maker Deere & Co. (DE) reported Wednesday lower profit in its second quarter, hurt by weak equipment sales, despite rigorous cost management. Earnings per share, however, topped analysts' estimates, while top line missed their view. Further, the company backed its earnings forecast for fiscal 2014, but trimmed equipment sales view.

In pre-market activity, Deere stock is losing $1.63 or 1.74 percent, and trading at $91.98.

For the second quarter, net income attributable to company declined 10 percent to $980.7 million from $1.084 billion in the same period last year. Earnings per share declined 4 percent to $2.65 from $2.76 a year ago.

On average, 20 analysts polled by Thomson Reuters expected the company to report earnings of $2.48 per share for the quarter. Analysts' estimates typically exclude special items.

Equipment operations' net income declined primarily due to the impact of lower shipment volumes, and the unfavorable effects of foreign-currency exchange, partially offset by price realization.

Net income attributable to the company's financial services subsidiary, John Deere Capital Corp., however, increased with growth in the credit portfolio, partially offset by higher expenses.

The company noted that it kept costs and assets well under control while successfully managing major new-product transitions associated with more stringent emissions standards.

Total net sales and revenues declined 9 percent to $9.95 billion from $10.91 billion in the prior year. Total net sales of the equipment operations dropped 10 percent to $9.25 billion from $10.27 billion last year. Wall Street expected revenues of $9.65 billion.

The company noted that sales included price realization of 2 percent and an unfavorable currency-translation effect of 1 percent for the quarter.

Equipment net sales in the United States and Canada decreased 12 percent, while sales were down 6 percent outside the U.S. and Canada.

In the equipment division, sales of Agriculture & Turf fell 12 percent due largely to lower shipment volumes, the previously announced sale of John Deere Landscapes and the negative currency impacts, despite price realization. Construction and forestry sales, however, increased 2 percent as a result of higher shipment volumes.

Looking ahead for fiscal year 2014, Deere continues to expect attributable net income to be about $3.3 billion.

Chairman and Chief Executive Officer Samuel Allen said, "John Deere expects to achieve near-record earnings for the full year and the company is well-positioned to deliver solid financial results throughout the business cycle."

Meanwhile, equipment sales are now projected to decrease about 4 percent for fiscal 2014 and for the third quarter, including an unfavorable currency-translation effect of about 1 percent for the year. The company previously expected full-year equipment sales to decrease about 3 percent. In addition, the company now expects full-year sales of agriculture and turf equipment to decrease by about 7 percent, compared to previously expected decline of about 6 percent.

Deere's worldwide sales of construction and forestry equipment are still projected to grow by about 10 percent for year.