Feb 15, 2019
Deere profit trails estimate on higher costs, trade concerns
Bloomberg News
,Deere & Co. (DE.N), the world’s biggest tractor maker, reported first-quarter profit that trailed estimates by analysts amid higher costs and trade-war concerns.
The company affirmed its annual forecast while citing “unsettled conditions in some of our key markets.” With its iconic yellow and green tractors, Deere posted results among an increasing number of red flags in the U.S. agriculture economy beset by slumping soybean trade and commodity prices, sagging farmer incomes and tightening credit.
Key Insight
-“Although Deere has continued to make solid progress on a number of fronts and reported higher earnings for the quarter, our results were hurt by higher costs for raw materials and logistics as well by customer concerns over tariffs and trade policies,” Chief Executive Officer Samuel Allen said Friday in a statement.
-Moline, Illinois-based Deere affirmed its annual forecast “despite unsettled conditions in some of our key markets”
-The struggling agriculture economy “has weighed on market sentiment and caused farmers to become more cautious about making major purchases,” Allen said.
-Because of steel tariffs, the trade wars are increasing costs of making some equipment, making them less competitive.
-On Thursday, the farm belt’s malaise deepened after the U.S. Department of Agriculture predicted soybean exports would stay below their pre-trade war levels until the 2026-2027 season. That followed a report that sales of the oilseed in early January had the worst week ever. Finally, the Federal Reserve Bank of Kansas City warned that farm incomes were likely to have a weak start in 2019 and that credit was tightening at lenders.
-The numbers: Deere Misses Estimates on Trade Woes, Raw Material Costs