Deere & Co. missed quarterly sales estimates, dragging its shares down more than 5%, but the company still sees agricultural market conditions improving worldwide.
For the third quarter, the world’s largest farm-equipment manufacturer on Friday reported worldwide net sales rose 16% to $7.808 billion, driven by a 13% jump in sales in its agriculture and turf division and 29% jump in its construction and forestry business.
Net sales of equipment operations increased 17% from a year ago $6.83 billion but missed analysts’ estimates of $6.9 billion. Profits climbed to $641.8 million, or $1.97 a share, helped by a lower effective tax rate.
It was Deere’s second straight quarter of lower-than-expected equipment sales as low crop prices have left farmers with less cash to spend on machinery.
CEO Samuel R. Allen, though, said Deere was continuing “to benefit from improving market conditions throughout the world. We are seeing higher overall demand for our products with farm machinery sales in South America experiencing strong gains and construction equipment sales rising sharply.”
“Deere’s performance also is being assisted by an advanced product portfolio and the continuing impact of a flexible cost structure and lean asset base,” he added in a news release.
In trading Friday, Deere shares fell 5.5% to $117.09. “The third-quarter report, coming off strong second-quarter results, surprised investors who were expecting another upbeat quarter underpinned by the company’s ability to control costs amid weak demand,” Reuters reported.
Deere’s results showed weakness domestically compared to other markets. Equipment net sales in the United States and Canada increased 11% for the quarter while elsewhere they rose 25%.
The company now expects equipment sales to rise 10% for the full year, compared with its previous forecast of 9%, led by a 20% increase in South American sales of tractors and combines as a result of improving economic and political conditions in Brazil and Argentina.
“We’re confident Deere is well-positioned to continue its strong performance and to fully capitalize on the world’s increasing need for advanced machinery and services in the future,” Allen said.