Trade war, flooding hurt Deere

Daniel Fowler
August 19, 2019

Shares of Deere (NYSE: DE) gained ground on Friday after the equipment company missed earnings expectations for its fiscal third quarter and lowered guidance for the full year, saying farmers were delaying purchases because of uncertainty around the trade war. Less than half of the normal soybean crop had been planted in that same period, leaving many farmers to decide whether to plant at all. It's the world's biggest soybean buyer and it purchased about 60 percent of USA soybean exports in 2018.

China bought $6 billion in U.S. farm exports past year, according to the U.S. Census.

The year-long tariff war between the United States and China has slashed the export earnings of American farmers.

Deere now anticipates profits of about $3.2 billion.

The Moline, Illinois-based company cut its full-year earnings outlook for the second time in the past three months. Yet despite its efforts, full-year production costs are projected to be above its previous estimates.

Deere said industry sales of agricultural equipment to be about the same as past year in the United States and Canada, which account for 60% of its overall business.

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"Concerns about export-market access, near-term demand for commodities such as soybeans and overall crop conditions have caused many farmers to postpone major equipment purchases", Chairman and CEO Samuel Allen said in a prepared statement. The company said factory production of high-horsepower models of tractors would be about 5% below retail sales volumes for the rest of the year.

That was partially offset by strong activity in the construction industry.

For the quarter ended July 28, Deere reported an adjusted profit of $2.71 per share compared with Refinitiv IBES' average analyst estimate of $2.85 per share. This is a 4.63% increase over earnings of $2.59 per share from the same period a year ago.

On a net basis, quarterly profit slipped to $899 million from $910 million a year ago. Revenue was $8.97 billion, which also fell short of the forecasted $9.39 billion.

Investors cheered the decision to control costs, sending its shares up 3.1 per cent at $148.07.

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