Deere has downbeat 2013 outlook, and shares fall


Share
Posted Online: Nov. 21, 2012, 5:45 pm
Comment on this story | Print this story | Email this story
MINNEAPOLIS (AP) — Tractor maker Deere & Co. is taking a cautious view of 2013, as drought and economic uncertainty hold back spending in some of the world's biggest farm economies.

Also, its most recent quarterly profit missed analysts' expectations. Deere shares fell $3.16, or 3.7 percent, to close at $82.83 Wednesday.

Deere is the world's largest maker of agricultural equipment, like the bright green tractors and combines that prowl farm fields during planting and harvest seasons. Its fortunes rise and fall with those of farmers.

In recent years, that's been a booming business as strong crop prices have put money in farmers' pockets. But there were signs of a slowdown in farm spending in Deere's outlook for the fiscal year that began this month.

And with the so-called "fiscal cliff" of potential tax increases and spending cuts looming in the U.S., Deere is cautious about big spending projects.

Deere expects agriculture sales in the U.S. and Canada to be flat for the year, as farmers continue to recover from a major drought in 2012. It predicted farmers will have $402.5 billion in cash receipts for 2013 — down by $2.5 billion from Deere's August prediction — but still higher than in 2012 or 2011.

It also predicted that European sales would be flat to down 5 percent, and little changed in Asia. It expects 10 percent growth in South America. Overall Deere predicted that worldwide equipment sales will rise 5 percent for the year.

Labor expenses are rising, too. Deere hired 5,000 more people this year to support its growth. And it will have spent $480 million shoring up its pension plans in fiscal 2012 — $5 million more than it had expected — and will spend some $550 million in the current fiscal year.

Still, it predicted a fiscal 2013 profit of $3.2 billion, slightly above the expectations of analysts polled by FactSet. It said prices for its equipment will rise 3 percent for the year, on top of a 4 percent gain in the fourth quarter.

In the quarter that ended Oct. 31, Deere's net income rose 2.7 percent to $687.6 million, or $1.75 per share. Revenue rose 14 percent to $9.79 billion. Analysts surveyed by FactSet expected earnings of $1.88 per share. A year ago Deere's net income was $669.6 million, or $1.62 per share.

Equipment sales rose to $9.05 billion, topping analysts' forecasts of $8.93 billion. Sales were strong in the U.S. and Canada, rising 26 percent for the quarter. Elsewhere, sales fell 2 percent. Sales of agriculture and turf equipment rose 16 percent, while construction and forestry equipment sales rose 7 percent.

In addition to farm equipment, Deere makes construction and forestry equipment such as backhoes, excavators, riding mowers and leaf blowers, making the company sensitive to movements in the global economy.

Deere is holding off on big spending projects as much as possible until January because of economic uncertainty, said Chief Financial Officer Rajesh Kalathur on a conference call.

"As the economics now become clearer, we may modify our plans. We will pull levers and cut down on investments if the scenario worsens, and we may accelerate our plans" if economies turn more positive, he said.

For the full fiscal year, Deere earned $3.07 billion, or $7.63 per share, up from $2.8 billion, or $6.63 per share, during the prior year. Revenue rose 13 percent to $36.16 billion for the year.

















 



Local events heading








  Today is Monday, April 21, the 111th day of 2014. There are 254 days left in the year.

1864 -- 150 years ago: The female sex seems to have gone crazy on the subject of dry goods. When high prices keep them from increasing their wardrobes, they turn to stealing. Yard goods, hats, shoes and other items are being picked up and carried home.
1889 -- 125 years ago: Members of Everts Commandery No. 18, Knights Templar, under Commander H.C. Cleaveland, marched from the Masonic Temple to Trinity Episcopal Church for their annual Easter services.
1914 -- 100 years ago: Nate Hultgren pitched the Augustana College baseball team to a 10-3 victory over Carthage, striking out 11 men and allowing only four hits.
1939 -- 75 years ago: Marvel Leonhardi, a Rock Island High School senior, was the winner of an essay contest on advertising sponsored by The Argus and Advertising Age, a national advertising publication.
1964 -- 50 years ago: The Augustana College band drew a crowd of 1,200 people for its annual home concert in Centennial Hall. The size of the crowd was indicative of the fact the band is rapidly approaching the stature of the Augustana Choir.
1989 -- 25 years ago: A benefit to raise money for extracurricular activities in the Rock Island Milan School District will be April 27 at the Quad City Downs harness race track. People buying $17.50 tickets to the second annual "Night at the Quad City Downs" will be entitled to an evening of harness racing and dinner.






(More History)