The Strategist

Deere&Co expects lower profit in 2020 due to US-China trade war

11/28/2019 - 01:54

The world's largest producer of agricultural machinery warned of a risk of lower profits in 2020, noting the negative sentiment among American farmers due to the trade war with China.

The financial results of Deere & Co for the IV quarter and fiscal 2019 as a whole, published on Wednesday, November 27, were better than market expectations. In particular, the company reported sales growth for fiscal 2019 by 5% to $ 34.886 billion. Earnings per share in the fourth quarter of the fiscal year amounted to $ 2.27 per share, with market expectations of $ 2.13 per share.

Deere & Co Chief Executive Officer John May commented on the company's results, stating that uncertainty remained in the agricultural sector. According to him, "due to the continuing trade tension, coupled with difficult weather conditions, many farmers have become more cautious in making large investments in new equipment."

The company expects a decline in sales of agricultural machinery by "5 to 10%" in the 2020 fiscal year. At the same time, sales going down by 5% in this segment are also expected in the USA and Canada.

At a conference call with investors, Deere & Co management also announced expectations for a net profit of $ 2.7-3.1 billion. Experts interviewed by Refinitiv expected Deere & Co to make a profit of $ 3.5 billion.

These forecasts led to a fall in Deere & Co shares at auction on Wednesday at the New York Stock Exchange by 5%. The company's quotes fell at higher volumes, while the US stock market as a whole showed moderately positive dynamics.

A month earlier, Caterpillar Corporation, the world's largest manufacturer of special equipment, also announced a decrease in its forecast for profit due to trade uncertainty.