John Deere & Co. Foresees Sales Slowdown

john deereJohn Deere & Company, famous for their tractors and other farm equipment, foresees a slowdown in sales due to farmer income lowering as the year progresses. Deere saw a 5 percent first-quarter net increase, but that is not expected to last as crop prices may drop across the country.

Deere said that farmers making strong income from high crop prices in the past few years has driven the company’s sales and established a high demand for tractors and other farm equipment made by the company. However, it expects that farm equipment sales could fall by at least 6 percent in the coming months, especially sales of the larger equipment.

Deere projects a 3 percent fall for the year and a 6 percent fall just in the second quarter. Its forestry and construction equipment should rise to about 10 percent as the U.S. economy bounces back and more homes are built across the nation.  Its profit guidance is unchanged this year at roughly $3.3 billion. This is why John Deere is foreseeing a possible slowdown in sales for farming equipment this year but is expecting larger commercial equipment to pick up the slack as the US economy bounces back.

Chairman and CEO of Deere and Company issued a prepared statement saying that even while facing only moderate demand for farming equipment Deere is “well-positioned” to continue to do “solid” performance this year. The net income for the company in the first-quarter, which recently ended on January 31, brought the company $681 million, that’s a 4.8 percent year-over-year increase.

That makes earnings per share worth about $1.81, that up from just a year ago when a share was worth $1.65. That beat many analysts’ predictions of the shares only reaching $1.53 this year. Also, revenue climbed for Deere up to 3 percent to $7.7 billion due to a strong sales market in Canada and the U.S. Overall equipment sales totaled $6.9 billion. Deere and Company is still considered one of “The Stocks to Buy.”

However, their farm equipment division may take a hard blow as some analysts’ are expecting Deere stock performance to tread backwards to more “historical norms” due to dwindling corn prices. Those same analysts’ are expecting lower corn prices to add pressure to the demand for farm equipment in the coming year.  However, with the US economy on the rebound it may be able to supplement those lost sales with larger machine’s that are used for building homes and clearing large areas of land to build those homes on.

John Deere and Company was established in 1837 by a blacksmith. The company is well-known for their equipment and the “John Deere Green” color used on all of it. The company is a household name and a staple in the U.S. farming world. Even if Deere and Company is forecasting low sales this year it is only inevitable that Deere and company will bounce back and continue to not only farm U.S. and foreign soil but also be part of building communities for years to come.

By Adam Stier

Sources:

St. Louis Post-Dispatch
The Street
USA Today

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