Deere & Co. released earnings Friday, shrugging off falling sales to come in ahead of estimates. It went on to cut earnings estimates for 2015
The company reported worldwide net sales and revenues for the first quarter of $6.383 billion, down 17% against $7.654 billion last year. Equipment operations accounted for $5.61 billion quarter compared with $6.95 billion a year ago. One percent is attribute to losses from unfavorable foreign currency conversion.
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Sales of construction and forestry equipment helped pick up sagging sales of farm equipment, something CEO Samuel Allen credits to Deere’s diversity, "Deere's first-quarter performance reflected sluggish conditions in the global farm sector, which reduced demand for agricultural machinery, particularly larger models, and led to lower sales and income. At the same time, our construction and forestry and financial services divisions had higher profits, showing the benefit of a well-rounded business lineup.”
The drop in sales of combines and tractors have the company cutting its earnings forecast for 2015, blaming lower crop and livestock prices for forcing farmers to hold off on big equipment purchases. It says sales are expected to lose 19% year over year in its second quarter, and a total of 15% for 2015.
Deere’s plans for reaching out to new markets and customer groups are making progress. For these reasons, we remain confident about the company’s ability to deliver solid returns throughout the business cycle." Samuel Allen, CEO
It’s not all unexpected. Government analysts predicted a big drop in agriculture exports in 2015. Deere has been reactive, hundreds of jobs have been cut and production has been pulled back in response to the lower demand in the U.S. and Canada.
Despite the outlook, Allen said, “Even with a continued pullback in the agricultural sector, John Deere expects to remain solidly profitable in 2015, our forecast reflects a level of results much better than we’ve experienced in previous downturns."
Long term for Deere, Allen was just as optimistic. He said the company is in position to expand globally as foreign economies aren't affected by U.S. farming.