Deere profit beats on better demand for farm equipment, shares jump

Cornelia Mascio
Mag 19, 2017

Deere & Co reported on Friday a bigger-than-expected quarterly profit, as sales rose for the first time in 13 quarters on improving demand for its farm and construction equipment.

In all for the second quarter, Deere reported a profit of $802.4 million, or $2.49 a share, up from $495.4 million, or $1.56 a share, a year earlier.

The revisions came as Deere reported "signs of further stabilisation" in market conditions, after a downturn fuelled by the dent to farm incomes from weaker crop prices.

Deere said it now expects fiscal 2017 net income attributable to the company to be about $2 billion, up from $1.5 billion estimated previously. Total equipment sales for the quarter rose 2.2% to $7.26 billion. The company has been sounding the alarm on a "global farming recession" which has weighed on results over the past several quarters.

Updated outlook for fiscal 2017: Equipment sales and net sales are projected to increase about 9% (vs.an increase of 4%), while net income is anticipated to be about $2B (vs. $1.5B).

Analysts had pencilled in group sales growth of 4.0%.

For the third quarter, analysts are looking for EPS of $1.53 and revenues of $6.3 billion.

"We are seeing modestly higher overall demand for our products, with farm machinery sales in South America experiencing a strong recovery", CEO Samuel Allen declared. The company will gain from the implementation of operating plans and disciplined cost management as well as the impact of a broad product portfolio. That's the fifth consecutive quarter the company has beaten the consensus.

Shares of Deere traded up 5.5% at $118.81 in the premarket Friday morning, a new 52-week high if it holds after the bell. The 52-week range is $76.73 to $114.96.

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