Early today,
Deere & Company (
) reported fiscal third quarter earnings of 99 cents per share, well above the Zacks Consensus Estimate of 57 cents per share. However, quarterly earnings were down 27% year over year, primarily due to a double-digit decline in sales.
Quarterly revenue of $5.9 billion was down 24% from the prior-year period. Net sales from the company’s worldwide equipment operations were down 25% year over year at $5.3 billion as farmers and other customers cut their spending under recessionary conditions. Equipment net sales in the U.S. and Canada dropped 16%, while the net sales outside the U.S. and Canada were down 37%.
Agriculture & Turf segment sales fell 21% due to lower shipment volumes and unfavorable currency translation impact, partially offset by improved price realization. The Segment’s operating profit was $480 million, compared to $725 million last year. Lower operating profit was driven by lower revenue, which was partially offset by a decline in SG&A expenses.
Sales in the Construction and Forestry segment were down 47%, reflecting a significant decline in shipment and production volumes. As a result, the segment posted an operating loss of $28 million for the reported quarter, compared to an operating profit of $93 million last year.
Deere projects a 21% drop in equipment sales for the full fiscal year, including a 34% drop in the fourth quarter. The company’s forecast assumes an unfavorable currency translation impact of approximately 4% for the year and about 1% for the fourth quarter. Net income for fiscal 2009 is forecasted at around $1.1 billion.
Full-year sales from the Agriculture & Turf business are forecasted to decline 15% with lower expected sales from across the regions. Construction and Forestry segment sales are expected to decline by about 47% due to low levels of construction activity in the U.S. and further deterioration in the global forestry markets.
We expect continued weakness in both the segments for the next couple of quarters, as we do not see any drivers for growth in farm spending and U.S. construction activity over the coming months.
