DEERE CUT YEARLY OUTLOOK

Deere & Co have missed quarterly profit estimates for the fifth-straight quarter and have cut their full-year outlook.

Reuters say the escalating U.S.-China trade war threatens to further hit farm incomes and demand for the company’s equipment.

The company reported net income of $1.135 billion for the second quarter ended April 28, 2019, compared with net income of $1.208 billion for the quarter ended April 29, 2018.

For the first 6 months of the year, net income attributable to Deere & Co. was $1.633 billion vs. $673.2 million for the same period last year.

Affecting last year’s results were charges to the provision for income taxes due to U.S. tax reform legislation (tax reform). Without these adjustments, net income attributable to Deere & Co. for the second quarter and first six months of 2018 would have been $1.034 billion and $1.476 billion, respectively.

Worldwide net sales and revenues increased 6 percent, to $11.342 billion, for the second quarter of 2019 and rose 10 percent, to $19.326 billion, for six months. Net sales of the equipment operations were $10.273 billion for the quarter and $17.214 billion for six months, compared with $9.747 billion and $15.721 billion last year.

"John Deere produced solid results for the quarter despite uncertain conditions in the agricultural sector," said Samuel R. Allen, chairman and chief executive officer.

"Ongoing concerns about export-market access, near-term demand for commodities such as soybeans, and a delayed planting season in much of North America are causing farmers to become much more cautious about making major purchases."

The company lowered its fiscal 2019 profit outlook to $3.3 billion, from its prior forecast of $3.6 billion, while raising its estimate for full-year costs by one percentage point to 76% of net sales, as the company speeds up research and development expenses.

“Although the long-term fundamentals for our businesses remain favourable, softening conditions in the agricultural sector have led Deere to adopt a more cautious financial outlook for the year," said Allen

“The lower forecast is partly a result of actions we are taking to prudently manage field inventories, which will cause production levels to be below retail sales in the second half of the year.

"At the same time, Deere’s long-term strategies remain on track and we are fully committed to their successful execution. We continue to expand our global customer base and are encouraged by the market’s positive response to our line-up of advanced products and services.”