Deere sees weak equipment sales in 2016 as farm economy remains soft
By Meredith Davis
(Reuters) - Deere & Co (DE.N: Quote) on Wednesday reported a drop in quarterly earnings that was not as steep as Wall Street expected and gave a less dire outlook than analysts had feared, saying it was well-positioned to weather a worsening slump in demand for its farm equipment.
Shares of the maker of John Deere tractors were up 4 percent at $79.40 in afternoon trading.
Chief Financial Officer Raj Kalathur told analysts on a conference call that while the company forecasts its third straight year of declines in sales of agricultural equipment, its main business, in fiscal 2016, it also expects to remain “solidly profitable.”
"We are forecasting a very healthy level of cash flow of over $2.5 billion in 2016," Kalathur said. "Our actions and proactively controlling expenses, costs, and managing assets have enabled us to deliver substantially better results than in any of the past downturns."
Deere expects total equipment sales to drop about 11 percent in its first quarter, which began on Nov. 1, and fall about 7 percent for the year.
Deere also forecast net income attributable to the company at about $1.4 billion for fiscal 2016, down from $1.94 billion in 2015. Analysts on average were expecting about $1.31 billion, according to Thomson Reuters I/B/E/S.
While Deere has managed to beat analysts' expectations, market fundamentals largely remain weak.
The company relies on the United States and Canada for the bulk of its sales and revenue. But industry sales of high-powered two-wheeled drive tractors in those countries fell 34 percent in October, the Association of Equipment Manufacturers said. Continued...