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Deere In Headlights After Guidance Cut: Sees 10% Sales Drop Due To “Downturn In Global Farm Economy”

February 19, 2016

Deere In Headlights After Guidance Cut: Sees 10% Sales Drop Due To “Downturn In Global Farm Economy”

It is not just Caterpillar that continues to post horrendous numbers, and has now recorded 38 consecutive months of declining Y/Y sales, double the length of the contraction of the great financial crisis. Moments ago heavy farm equipment maker Deere likewise shocked its investors with a round of terrible numbers, when at first it reported a revenue and EPS beat, announced it had earned $0.80 EPS in Q4, above the $0.71 estimate, on $5.53BN in revenue, well above the $4.90BN expected, however it was the unprecedented drop in the forecast that was the punchline.

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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