Reflects downtown in global farm economy
By Farms.com Media Team
To what extent John Deere is a bellwether for the ag industry, recent news from the equity markets are something of a reflection of farming as we enter spring 2016.
The last few days were interesting ones for Deere & Co. (NYSE:DE), with increased investment from Warren Buffett, the release of much-anticipated fiscal Q1 results, and then the Moline, Illinois-based company cutting its outlook for the year.
Analysts commented that Deere was sending “warning shots to its industry,” but it appears to be a measured approach to the current realities of the marketplace.
ON TUESDAY: A regulatory filing showed that Buffett’s Berkshire Hathaway upped its interest in Deere by about 5.8 million shares, to a 7.2 stake in the company. Buffett is now Deere’s largest institutional shareholder with a value of approximately $2 billion.
Industry watchers explained Deere’s positive cash flow and reliable dividend yield made the share purchase attractive. Deere stock dropped some 14 per cent in 2015, but it had increased 7 per cent so far this year (up to Wednesday).
ON FRIDAY: Deere posted adjusted earnings of 70 cents per share, down nearly 38 per cent from the Q1 results from year-earlier. The company is expected to report revenue of $4.86 billion, a 13 per cent decline from the prior year.
Also on Friday, the company slashed its outlook for the year, saying it expects sales to fall about 10 per cent. Previous estimates were for a 7 per cent decline.
Earnings are now anticipated to be $1.3 billion, down from an earlier estimate of $1.4 billion.
Explained CEO Samuel Allen, “John Deere’s first-quarter results reflected the continuing impact of the downturn in the global farm economy as well as weakness in construction equipment sales.”
Farm equipment sales in Canada and the U.S. fell about 18 per cent in the quarter.