Deere & Co (N:DE) on Friday forecast a sharp fall in full-year profit as farmers and ranchers struggle to bring their goods to market because of coronavirus-led restrictions, crushing demand for equipment like harvestors and tractors.
President Donald Trump announced a $19 billion relief program in April to help U.S. farmers cope with the impact of the health crisis, and analysts have said the additional liquidity will likely support farm machinery sales this year.
Shares of Deere rose 3% in light premarket trading after the company topped quarterly estimates for profit as demand for farm equipment fell less than feared and the company kept a tight lid on costs.
The company typically sees a pick-up in sales of farm equipment after January as farmers start purchasing equipment to plant fields. That likely helped demand for farm machinery hold up better than sales of construction and forestry equipment during the second quarter.
Farm machinery sales fell 18% to $5.97 billion, while construction and forestry equipment sales dropped by a quarter to $2.26 billion.
Deere said it expects fiscal 2020 profit in a range of $1.6 billion to $2 billion. The company had posted a profit of $3.25 billion in 2019.
Net income attributable to the company fell 41% to $666 million, or $2.11 per share, in the quarter ended May 3, but beat analysts’ average estimate of $1.62 per share, according to IBES data from Refinitiv.
Total net sales and revenue fell 18% to 9.25 billion. Equipment sales declined 20% to $8.22 billion, beating analysts’ expectation of $7.69 billion.
Total costs and expenses fell 15.6% to $8.33 billion.