Deere tractor sales hold up in pandemic

John Deere signs and tractors are seen at the World Agriculture Expo in Tulare, Calif., on Feb. 12. Patrick T. Fallon/ Bloomberg

Deere & Co. shares rose after the top tractor maker navigated pandemic upheavals better than expected and surprised analysts by reinstating earnings guidance.

While sales and profit fell in the three months through April, the drop was less severe than analysts estimated as agriculture — deemed essential in the lockdown era — proves more resilient than many other industries.

Lower costs helped defend margins in a quarter that’s often Deere’s strongest as farmers buy planting equipment for the growing season. Even though supply-chain disruptions are weighing on its customers and the China trade deal is a wild card, Deere reported better pricing for its products through the quarter.

The cycle of farmers replacing aging farm machinery will persevere through near-term challenges like the trade war, tough growing conditions and the economic shutdown, according to Edward Jones analyst Matt Arnold.

There are still supply chain issues, though not enough to derail sales and operations. Responding to customer demand “has been a challenge” due to “barriers,” the company said in a statement, noting the pandemic uncertainties could hurt its results and financial position in the future.

The Moline, Ill.-based company is also shoring up its liquidity. It raised $4.5 billion in funding during the pandemic.

Deere forecast its 2020 worldwide agriculture equipment sales to be down 10% to 15%, and said industry sales would decline 10% in the U.S. and Canada — its biggest money-making region. It said construction and forestry equipment sales would drop 30% to 40%.

Fiscal second-quarter adjusted earnings were $2.11 cents a share. compared with the $1.62 average estimate and $3.52 a year ago.


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