Cost cuts help boost Deere profit in 2Q
A Deere employee works on the grain tank of a harvester as the massive machine makes its way down the assembly line at the plant in East Moline, Ill. (Antonio Perez/Chicago Tribune / )
Deere & Co. on Wednesday posted a stronger-than-expected profit as cost cuts helped offset lower sales of its tractors, harvesters and earth-moving equipment.
But the company also lowered its forecasts for its full-year agricultural equipment sales and for the U.S. construction industry, sending its shares down nearly 2 percent.
Deere posted a profit of $980.7 million, or $2.65 a share, for the second quarter ended on April 30, down from $1.08 billion, or $2.76 a share, a year earlier. Analysts on average had expected $2.48 a share, according to Thomson Reuters I/B/E/S.
Sales fell 9 percent to $9.95 billion.
Deere said it expected full-year sales of agricultural equipment to be down about 7 percent in fiscal 2014. Three months ago, the company had forecast a decline of about 6 percent.
Moline-based Deere, the world's largest maker of farm equipment, has warned that demand for its products will fall in most markets following a bumper crop that sent commodity prices lower.
Most analysts expect crop receipts, which tend to correlate with farm equipment purchases, to decline 10 percent or more this year.
Some investors hoped a rebound in construction demand, particularly in the United States, would help offset that softness for Deere, which also makes equipment for builders.
But Deere scaled back its outlook for that industry on Wednesday as well. The company said it expected total U.S. construction investment to grow at a 4.3 percent annual rate in 2014, down from a previous forecast rate of 6.3 percent.
Deere also said it expected 1.05 million housing starts, down from a previous forecast of 1.16 million.
Shares of Deere were down 1.7 percent at $91.98 in trading before the market opened
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