Deere In Headlights After Guidance Cut: Sees 10% Sales Drop Due To “Downturn In Global Farm Economy”
According to the company’s announcement, equipment sales are projected to decrease about 10% for fiscal 2016 and to be down about 8 percent for the second quarter compared with the same period a year ago.
Here is how CEO Samuel Allen tried to spin the cut in guidance which DE had previously seen at just -7%: “Although Deere expects another challenging year in 2016, our forecast represents a level of performance much better than we have experienced in previous downturns,” Allen said.
Downturn? We thought the Fed was hiking because of the “strong recovery.”
Some more details: Deere cuts 2016 U.S. farm cash receipts forecast to $381.3b, had seen $394.4b (Nov. 25)
- Cuts 2016 U.S. farm net cash income to $90.8b, had seen $106.9b (Nov. 25)
- Sees yr U.S. farm commodity price:
- Corn 2015/16 $3.60/bushel vs prior $3.65
- Wheat 2015/16 $5.00/bushel, unchanged
- Soybeans 2015/16 $8.80/bushel vs prior $8.90
- Cotton 2015/16 60c/pound vs prior 59c
- Cuts DE 2016 capex outlook to ~$775m from ~$800m
“This illustrates the impact of our efforts to establish a more durable business model and a wider range of revenue sources.”
Alas, a 10% drop in revenue does not validate the “durable business model” with more revenue sources.
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