Deere Reports Less-Severe Sales Decline, Tops Expectations

Deere & Co. said its second-quarter sales decline wasn't as steep as feared, resulting in earnings that topped expectations and a revenue forecast for the year that is slightly less dismal.

The world's largest seller of farm tractors and harvesting combines has been struggling through a prolonged slump in U.S. farm machinery demand that has been partly due to the effect of lower prices for commodities like corn and soybeans on farmers' incomes. At the same time, the strong U.S. dollar has made its machinery more expensive abroad, and cutbacks in investment spending by energy-related companies have hurt Deere's business.

In February, the company warned that its equipment sales decline this year would accelerate, forecasting a 10% decline after having previously expected a 7% decrease. But on Friday, Deere signaled that the worst of its downturn might be nearing its end, nudging up its 2016 equipment sales forecast for 2016 to predict a 9% fall.

"Although our forecast calls for lower results this year in light of ongoing market pressures, Deere is continuing to perform at a much higher level than in previous downturns," Chief Executive Samuel Allen said.

For the second-quarter, Deere said total sales fell 3.6% to $7.88 billion. That decline was much less steep than the 18% drop analysts predicted. Sales of agricultural and turf equipment slipped 0.4% to $5.74 billion.

In all, Deere reported a profit of $495.4 million, or $1.56 a share, down from $690.5 million, or $2.03 a share, a year earlier. Analysts expected $1.47 in per-share profit, according to Thomson Reuters.

Mr. Allen highlighted Deere's efforts to contain costs in the face of lower sales. The company brought overhead expenses down by 3.4% during the period.

Write to Lisa Beilfuss at [e-mail]

(END) Dow Jones Newswires

May 20, 2016 08:05 ET (12:05 GMT)

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