Deere & Co. (NYSE: DE) reported third-quarter fiscal 2016 results before markets opened Friday. The farm and heavy equipment maker posted diluted earnings per share (EPS) of $1.55 on revenues of $6.72 billion. In the same period a year ago, the company reported adjusted EPS of $1.53 on revenues of $6.84 billion. Third-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.94 and $6.09 billion in revenues.
Year over year, net sales for the quarter fell 16% in the United States and Canada and 12% elsewhere, and currency exchange rates had a negative impact of 4% on revenues. Higher profits for the quarter were primarily driven by price realization, lower production costs and a decrease in selling, administrative and general expenses, partially offset by reduced shipment volumes and the unfavorable effects of foreign-currency exchange.
For 2016 Deere now expects equipment sales to decline by about 10% (more than the 9% projected at the end of the second quarter), including a negative 2% impact from currency exchange effects. Fourth-quarter sales are projected to by 8%, including a negative currency exchange effect of 1%.
Net income for the year is now forecast at $1.35 billion, up from a prior estimate of $1.2 billion, but down from 2015 net income of $1.94 billion. Based on 315.7 million diluted shares outstanding, that works out to about $4.28 per share.
Consensus estimates for Deere’s fiscal fourth quarter call for EPS of $0.59 and revenues of $5.52 billion. For the full year, analysts are looking for EPS of $3.87 and revenues of $23.61 billion.
CEO Samuel R. Allen said:
John Deere’s performance in the third quarter reflected the continuing impact of the global farm recession as well as difficult conditions in construction equipment markets. All of Deere’s businesses remained profitable with the Agriculture & Turf division reporting higher operating profit than last year. As in past quarters, our results benefited from the sound execution of our operating plans, the impact of a broad product portfolio, and our success keeping a tight rein on costs and assets.
In late July, Deere announced that 120 employees at its East Moline, Illinois, plant would be let go from a total workforce of 1,050.
Managing its costs allowed Deere to post a higher profit in the third quarter than in the same period last year, even though sales were down. The improved outlook for net income should give the shares a boost in Friday trading, but it’s important to note that the increase is still short of the company’s original estimate of $1.4 billion. Once again, Deere has managed to hurdle a low bar.
Shares of Deere traded up about 1.4% at $77.98 in the premarket Friday morning, having closed Thursday at $76.94. The 52-week range is $70.16 to $88.20. Thomson Reuters had a 12-month price target of $76.95 before the report.