Deere (NYSE:DE) reported sizable growth in earnings and revenue for the fiscal third quarter, though sales disappointed as U.S. farmers continue to limit spending on new equipment.
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The maker of the iconic green-and-yellow tractors has seen demand in the U.S. and Canada lag behind the rest of the world. Low crop prices have discouraged U.S. farmers from investing in tractors, harvesters and other equipment in recent years. In response, Deere has cut production and turned its attention to international markets. In June, Deere reached a $5.1 billion deal to buy German construction equipment maker Wirtgen, which has a large footprint in China.
Deere said the U.S. and Canada are experiencing low crop prices and weakness in the livestock sector, weighing on sales of large and small agricultural equipment. For 2017, Deere expects those markets to post a 5% decline in sales of agricultural machinery. North America is also dragging down the company’s forestry-related sales.
In the latest quarter, net equipment sales grew 17% to $6.83 billion. However, analysts were looking for stronger results of $6.92 billion.
Shares fell 7.6% to $114.54 in recent trading. Deere remains up 9.9% since the start of 2017.
Markets outside the U.S. and Canada lifted sales in the third quarter ending July 30. Sales of farm and construction equipment overseas jumped 25%, more than double an 11% increase in the U.S. and Canada.
Samuel Allen, Deere’s chairman and CEO, said John Deere equipment benefited from “improving market conditions throughout the world.” Allen added that farm machinery demand was driven by South America, while the state of the construction market has improved globally.
Deere earned a $641.8 million profit, up 31% year-over-year. Per-share earnings climbed to $1.97 from $1.55, beating Wall Street expectations by two cents. Revenue from equipment sales and Deere’s finance unit was up 16% at $7.81 billion.
Moline, Illinois-based Deere expects a 24% increase in equipment sales during the fourth quarter. For the full year, sales are projected to improve 10%.
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