Deere Raises Sales Growth Outlook for 2017

“We are seeing signs that after several years of steep declines key agricultural markets may be stabilizing."
Matthew HellerFebruary 21, 2017
Deere Raises Sales Growth Outlook for 2017

Deere & Co. reported better-than-expected quarterly results and raised its sales growth outlook for 2017, citing signs that demand is stabilizing in key markets after years of falling sales.

For the first quarter, the world’s largest farm-equipment manufacturer earned a profit of $193.8 million, or 61 cents a share, down from $254.4 million, or 80 cents, a year earlier. The recent quarter included a $94 million pretax charge related to employee separation programs.

Net sales fell 1.5% to $4.69 billion, with total equipment sales for the quarter rising 2% to $5.62 billion. Analysts had forecast earnings of 55 cents and equipment sales of $4.68 billion.

“John Deere has started out the year on a positive note in the continued face of soft market conditions,” CEO Samuel R. Allen said in a news release. “Although the quarter’s sales and earnings were somewhat lower than last year, all of our businesses remained solidly profitable.”

“Deere’s performance showed further benefits from the sound execution of its operating plans, the strength of a broad product portfolio and the impact of a more flexible cost structure,” he added.

As The Wall Street Journal reports, the company also “offered a surprisingly upbeat outlook for equipment sales growth, even with continued weakness expected in the U.S. market that Deere dominates.”

The forecast is for sales of farm and construction machinery to rise about 4% this year to about $24.3 billion, an improvement from the 1% expansion forecast in November. Deere also raised its net income forecast to about $1.5 billion from $1.4 billion, implying earnings per share about $4.54. Analysts were expecting about $4.53.

“We are seeing signs that after several years of steep declines key agricultural markets may be stabilizing,” Allen noted.

Deere is expecting that full-year 2017 agricultural industry sales in the EU will fall about 5% due to low commodity prices and farm incomes, but sales of tractors and combines in South America are projected to be up 15 to 20% as a result of improving economic and political conditions in Brazil and Argentina.