US farm industry stabilizing as China trade war cools: Deere
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Deere & Co. reported better-than-expected fiscal first-quarter results and said the U.S. farming industry, ravaged by Washington’s trade war with Beijing, is showing signs of improvement. Shares rallied on the news.
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The Moline, Illinois-based farm-equipment manufacturer reported first-quarter profit jumped 3.8 percent year over year to $517 million, or $1.63 a share. Revenue slumped 4.4 percent to $7.63 billion, beating the $6.41 billion that was expected. The results include a $127 million pretax charge related to a voluntary employee-separation program.
“John Deere’s first-quarter performance reflected early signs of stabilization in the U.S. farm sector,” CEO John May said in a statement. “Farmer confidence, though still subdued, has improved, due in part to hopes for a relaxation of trade tensions and higher agricultural exports.”
A U.S.-China trade deal was signed by President Trump in January, providing a respite from steadily escalating trade barriers as Washington sought to force Beijing to negotiate a broad commerce agreement.
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Still, sales at Deere's agriculture and turf division fell 4 percent from the year prior to $4.49 billion during the three months through Feb. 2. The sales drop came amid lower shipment volumes and unfavorable foreign-exchange fluctuations, which were partially offset by higher prices.
While Deere's farm business is showing signs of bottoming, activity in the construction industry, another key market, has slowed, too, causing the company to reduce production and lower inventories. Sales from the company's construction and forestry unit slumped 10 percent to $2.04 billion.
Overall, Deere reported net income from its equipment operations spiked 13 percent from a year ago to $383 million as sales slid 5.9 percent to $6.53 billion.
Looking ahead, Deere sees fiscal 2020 net income of between $2.7 billion and $3.1 billion. Sales at its agriculture and turf segment are expected to decline by 5 percent to 10 percent amid lower demand for large equipment in Canada. Worldwide construction and forestry equipment sales may drop 10 percent to 15 percent amid slowing building activity and efforts to reduce inventory.
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Deere shares fell 4.3 percent this year through Thursday, underperforming the S&P 500's 4.4 percent gain.
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