Deere earnings dive on ag sag; outlook down

Deere & Co. (DE) said its net income was $386.8 million, or $1.12 per share, for the quarter that ended Jan. 31., the equipment-maker's first fiscal quarter of 2015.

That was a drop of 43% from the year-earlier net income of $681.1 million, or $1.81 per share.

Worldwide revenues for the first quarter decreased 17%, to $6.383 billion, compared with $7.654 billion last year.

Deere's ag business slumped, but other operations were strong.

The equipment maker cut its full-year guidance to $1.8 billion from $1.9 billion, about $5.20 per share.

"Sell," says analyst Jim Corridore of S&P Capital IQ. In fact, he's been saying so for a while. He figures the stock will drop to $80. "While we think DE is doing a good job dealing with a difficult operating environment, we expect weak farm income over the next two years to hold back ag equipment sales."

Analysts had expected the profit tumble. Shares closed up 0.8% to $92.43, up from the previous close of $91.71. They had fallen to around $90 in early trading.

"Deere's first-quarter performance reflected sluggish conditions in the global farm sector, which reduced demand for agricultural machinery, particularly larger models, and led to lower sales and income," said CEO Samuel Allen.

"At the same time, our construction and forestry and financial services divisions had higher profits, showing the benefit of a well-rounded business lineup. Deere's results also demonstrated the progress we've made creating a more flexible, responsive cost structure."

The worldwide producer and distributor of agricultural and forestry equipment, construction equipment and engines had posted a positive earnings surprise of 15.8% the previous quarter.

The company said in January that it will lay off 910 workers in Iowa and Illinois as part of its production cuts. Those are atop more than 1,000 job cuts announced last August.