Deere said declines in next year's revenue will be smaller than analysts have been expecting, and company shares rose almost 4 per cent before the opening bell.
Deere makes tractors, combines, plows and other gear that farmers use to till and harvest crops, so its fortunes rise and fall with the farm economy. Farm gear and lawn tractors make up 82 per cent of its equipment sales, with construction gear accounting for the rest.
Crop prices have been dipping after setting record highs, so farmers have less money in their pockets. Corn prices have plunged 44 per cent in the past year. Deere projected further declines for corn, soybeans, and wheat. The declines will dampen demand, Deere said, especially for large farm equipment.
Deere predicted that equipment sales will fall 3 per cent next year, which works out to revenue of $33.95 billion. It said fiscal 2014 net income would fall almost 7 per cent to $3.3 billion.
That, however, is still better than the $3.07 billion expected on Wall Street.
For the quarter Deere earned $806.8 million, or $2.11 per share. That was up from $687.6 million, or $1.75 per share, a year earlier. The results were well ahead of the $1.90 per share profit expected by analysts surveyed by FactSet.
Equipment revenue fell 5 per cent to $8.62 billion, matching analyst estimates. Deere sold fewer pieces of equipment, but prices rose on the gear it did sell, which is why profits were higher even though revenue fell.
Sales of agriculture and turf gear fell 4 per cent in the most recent quarter, and Deere said they will fall 6 per cent in the upcoming fiscal year. It predicted declines in the U.S. and Canada, South America, and Europe. It predicted slight gains for Asia.
Sales of construction and forestry gear fell 8 per cent in the quarter. Deere said those sales should rise 10 per cent in the year ahead as more houses are built. Global forestry sales will rise thanks to more activity in Europe, Deere said.
Shares of the Moline, Ill., company rose $3.09 to $85.90 in premarket trading.Suggest a correction