Although revenues and profits were lower in the second quarter at John Deere, the stock market took a “not as bad as I thought” approach on Friday. At press time, stock was trading higher on the news.
According to CNBC, the construction equipment maker reported fiscal second-quarter earnings of $2.11 per share, compared to the consensus estimate of $1.62 a share. Revenue beat estimates as well. Higher debt, cost cutting, and reduction in capital spending helped the company counter slower sales.
The company reported that its agricultural machinery profits fell about 22% year over year, while sales fell 18%. The rest of the year does not look to get better, according to Deere, as it expects global equipment sales (ag and construction) to fall 30% to 40% this year as the COVID-19 pandemic weighs on demand.
It has not been a strong year for agricultural machinery sales based on the weakened farm economy and COVID-19 has plunged sentiment further. While Canada’s tractor and combine sales are down year to date (April) compared to a year ago, the Association of Equipment Manufacturers reported total US tractor sales only dropped 0.6%.
Farmers are evermore concerned about the cost of new and used equipment in this current agricultural commodity environment.