John Deere & Company reported February 21 that they received $517 million in earnings in the first quarter of 2020, which ended February 2. That’s an increase of $19 million compared to the quarter that ended in late January. Worldwide net sales and revenues, though, fell by 4% to around $7.63 billion, and net sales in the equipment operations were $6.53 million, down $411,000 million from 2019.
The Moline, Illinois-based farm equipment manufacturer occupies a key role as a bellwether of America’s agricultural and industrial outlook. In November of last year, CEO John May delivered a cautious earnings estimate of between $2.7 billion to $3.1 billion for 2020. That estimate remained unchanged in February’s report—but May is still sounding an optimistic note: He said the quarter’s performance shows that the farming sector is stabilizing.
“Farmer confidence, though subdued, has improved due in part to hopes for a relaxation of trade tensions and higher agricultural exports,” said May in a statement. Those hopes may be realized, depending on to what extent China fulfills the promises it made in the phase-one trade deal it struck with the US in the middle of January. That deal included promises by China to purchase billions of dollars in manufactured goods, including agricultural machinery. On February 20, China also issued a list of farm products it says are now eligible for exemption from retaliatory tariffs, including soybeans, pork, beef, and corn.
The report wasn’t all bright, though. Aside from the 4% dip in worldwide net sales and revenues, Deere’s ongoing efforts to slim down its operations may have affected its results. In particular, May said that a voluntary employee-separation program contributed to costs in the quarter, and that his efforts to trim production and lower inventory had hurt the company’s construction equipment sector.
May characterized the cost-cutting moves as advantageous for Deere in the long term, and expressed optimism about the future of technological innovation at the company. “Looking ahead, we are particularly encouraged by the broad use of precision technologies and believe the company is well-positioned to strength its leadership in this vital area,” he said.
