(Updates share move, CFO comment)
By Meredith Davis
Nov 23 Shares of Deere & Co jumped 11
percent to an all-time high on Wednesday after stronger pricing
and cost cuts allowed the agricultural and construction machine
manufacturer to beat quarterly earnings expectations.
Factors ranging from machinery pricing to lower overheads
spending helped Deere report a much smaller-than-expected
decline in quarterly earnings during the recession in the global
farm sector, CFO Raj Kalathur said on a conference call.
Higher sales volumes, an improved product mix and lower
materials costs and research and development spending, also
contributed, Kalathur added.
Less discounting during the quarter, especially on
agricultural machinery, contributed to higher pricing, Tony
Huegel, director of investor relations said during the
"It was all kind of internal - either pricing or cost
cutting," said Jefferies analyst Stephen Volkmann. "It's not
that the cycle is turning, it is that they are managing it
better than before."
Deere forecast revenue for the new fiscal year would fall
about 1 percent from $26.6 billion in 2016, while analysts on
average forecast a 3 percent decline for 2017.
Deere said it expected its equipment sales to decrease about
1 percent for fiscal 2017 and to fall about 4 percent in the
first quarter from a year earlier. While still a decline, it is
less steep than the net sales decline of 9 percent in fiscal
2016, compared with 2015.
The company also saw fiscal 2017 net income declining to
about $1.4 billion, from $1.52 billion in fiscal 2016.
"The farm economy will not get better until you see farmer
income levels rising, which have not for some years," Argus
Research analyst Bill Selesky said.
Deere shares were up $10.34 to trade at $102.35 their
highest level in Reuters data going back to 1980.
Deere forecast 2017 U.S. farm cash receipts would remain
steady with 2016, a sign the agricultural recession may be
easing, at least in the United States.
While Deere's revenue fell 3 percent to $6.52 billion, it
still beat analysts' estimates of $5.38 billion.
Net income attributable to Deere fell to $285.3 million, or
90 cents per share, in the fourth quarter ended on Oct. 31 from
$351.2 million, or $1.08 per share, a year earlier.
Analysts on average had expected 40 cents per share,
according to Thomson Reuters I/B/E/S.
Weak commodity prices and low farm income are both expected
to contribute to a 5 percent to 10 percent decline in full-year
2017 U.S. agricultural and turf industry sales of both large and
small equipment, the company said.
(Reporting by Meredith Davis in Detroit; Editing by Chizu
Nomiyama and Andrew Hay)