(Bloomberg) – Deere & Co., the largest manufacturer of agricultural machinery, increased its sales outlook for the year as demand for farm equipment remained stagnant despite an “uncertain” market due to the coronavirus pandemic.
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In Deere & Co. combine harvester is used to harvest soft red winter wheat in Kirkland, Illinois, US, on Friday, July 17, 2020. U.S. winter wheat production is forecast at 1.22 billion bushels, 4% down from June 1 forecast and 7% by 2019 .
Producer Moline, in Illinois, said net income for the fiscal year would be $ 2.25 billion, up from a May estimate of $ 1.6 billion to $ 2 billion. The company said it expects agricultural and turf equipment sales to decline 10%, compared to a previous range of 10% to 15%, with a better outlook in the US and Canada. Shares rose as much as 6.2% and closed at a record high of $ 199.50 in New York.
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“While unforeseen market conditions and related customer uncertainty will have a moderating effect on key markets in the long term, we believe Deere is well positioned to help make our customers more profitable and sustainable,” Chief Executive Officer John May said in a statement Friday. .
Deere’s shares are up 15% this year as demand for agriculture is held better than other sectors despite the coronavirus and the uncertainty over trade relations between the US and China. North American sales equipment sold in July, led by small tractors, according to Bloomberg Intelligence, as farmers replace winged vehicles. Third-quarter fiscal net income of $ 2.57 a share was down from $ 2.81 a year earlier, but exceeded the highest estimate among analysts.
Deere turned a ‘remarkable business’ in the quarter, analysts from Robert W. Baird & Co. said. including Mircea Dobre in a note. ‘Importantly, this beat was not just about cost cutting, because revenue was good for expectations. U.S. ag funds remain challenging, albeit stabilizing. “
However, sales of corn for food, auto fuel and poultry supplies are shrinking as efforts to stop the spread of coronavirus restaurants, keep drivers out of the way and shut down meat plants. That, along with the prospects for record returns and a lot of inventory, could put pressure on prices and limit any increases in spending on machines.
See also: Ugly Harvest Is Latest Test for Farmer Patience in Trump Country
In June, Deere shook up its management and adjusted how it works in an effort to respond more quickly to changing market conditions.
“The company has announced broad employee divorce programs that will be completed in the fourth quarter in support of its strategy to create a leaner, rougher organization,” according to the earnings statement.
In addition to improving its outlook for its group of agricultural and peat equipment, Deere said the rough sales decline of construction and forestry group was pared at 25% from the previous drop from 30% to 40%.
(Updates shares in second paragraph)
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