Deere & Co. announces third quarter earnings
Expectations on Wall Street are for lower shares on Deere & Co. following today's release of the corporation's third-quarter earnings, which rose seven percent but fell short earlier forecasts.
August 13, 2008 By Brandon Sun via Chicago Tribune
August 13, 2008
Des Moines, IA -Deere & Co. turned in fiscal third-quarter earnings this morning that rose 7 percent but fell short of forecasts, as surging prices for steel and other raw material squeezed profit margins for the world's leading farm-equipment maker.
The profit shortfall promises to drive Deere shares lower when trading opens later today.
Thanks to a jump in the price of corn and other commodity grains, the Moline manufacturing gian has benefited for more than two years from powerful global demand for its tractors, combines and other agricultural gear.
The company's latest results show that the robust demand has continued. But higher material costs are taking a toll, and so has the precipitous drop in the North American housing market, which has crimped orders for Deere's construction equipment.
In the quarter ended July 31, Deere's net income rose 7 percent to $575 million, or $1.32 a diluted share, from the year-ago $537 million, or $1.18 a share. Profit growth lagged well behind the 17 percent increase in Deere revenues, to $7.74 billion from $6.63 billion.
Per-share results fell short of the $1.36 a share analysts had been anticipating. In addition, Deere cautioned Wall Street to expect fourth-quarter net of $425 million, significantly below the $491 million analysts surveyed by Thomson Reuters had expected.
In premarket trading on the New York Stock Exchange Wednesday, Deere shares were trading down $5.59, or 8.1 percent, at $63.76.
"Though agricultural commodity prices have moderated," said Chairman and Chief Executive Officer Robert Lane, "they remain quite favorably by historical standars and are continuing to provide strong support to farm incomes and to the sale of productive farm machinery worldwide."
At Deere's ag-equipment segment, sales climbed 35 percent to $4.54 billion, while operating profit jumped an even-heftier 47 percent, to $634 million.
But sales at its commercial and consumer equipment operation slipped 1 percent to $1.33 billion — and profits tumbled 28 percent to $91 million.
At Deere's construction and forestry business, the damage was even worse: sales dropped 7 percent to $1.19 billion, and operating profit was down a punishing 38 percent at $93 million.