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Deere cuts 2013 sales growth guidance

Published: Wednesday, May 15, 2013 9:28 a.m. CDT
Caption
(AP photo)
In this July 2010 photo, a farmer climbs aboard a John Deere 9770 STS combine near Coy, Ark.

MOLINE – Deere & Co. said on Wednesday that bad weather and weak economies will hinder sales growth this year.

The company reported better-than-expected second-quarter earnings and maintained its full-year profit prediction, but the outlook lowered Deere's stock price in premarket trading.

Deere makes farm and construction equipment, and said sales of that gear would rise 5 percent during the current fiscal year, which is now half over. It had previously predicted growth of 6 percent.

The reduced sales expectation came after a long, cold winter in North America delayed the planting of this year's seeds. It also slowed construction work and reduced demand for turf-care equipment, the company said.

CEO Samuel R. Allen also said Deere's "near-term forecast is being tempered by lingering economic concerns in many parts of the world, which are restraining business confidence and growth."

Deere's second-quarter net income rose 3 percent to $1.08 billion, or $2.76 per share. That was up from $1.06 billion, or $2.61 per share, during the same period last year.

That topped analysts' average estimates for earnings of $2.71 per share.

Revenue from equipment sales rose 9 percent to $10.27 billion from $9.41 billion a year earlier. Analysts had expected equipment revenue of $9.82 billion. Including financial services, Deere revenue rose 9 percent to $10.91 billion.

Deere raised prices 3 percent and shipped more gear during the quarter.

The company predicted that sales of construction and forestry gear would fall 5 percent for the full year. Those sales were down 6 percent in the most recent quarter as shipments declined.

Sales of farm and turf equipment grew 12 percent for the quarter, and Deere predicted an increase of 7 percent for the full year. Commodity prices are still relatively high and farm incomes are continuing to support demand for farm equipment. It predicted full-year sales gains of 5 percent in the U.S. and Canada, but said sales in Europe will decline 5 percent after a poor harvest in the U.K. last year. Sales in South America are expected to rise 15 to 20 percent because of strong market conditions in Brazil.

Deere's full-year profit prediction of $3.3 billion is unchanged.

For the first half of fiscal 2013, net income rose 9 percent to $1.73 billion, or $4.41 per share, up from $1.59 billion, or $3.91 per share during the first half of 2012. Total revenue rose 9 percent to $18.34 billion, with equipment sales rising 10 percent to $17.06 billion.

Deere shares fell $3.27, or 3.5 percent, to $90.50 in premarket trading. They had been trading near their 52-week high of $95.60.

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