May 22, 2020 / 10:25 AM / 2 months ago

Deere signals recovery as U.S. farmers to benefit from relief program

(Reuters) - Deere & Co (DE.N) on Friday topped quarterly sales and profit estimates and forecast a smaller-than-expected fall in farm equipment sales for the year, signaling a recovery in demand for its harvesters and tractors.

The leaping deer trademark logo is seen on John Deere equipment at a dealership in Taylor, Texas, U.S., February 16, 2017. REUTERS/Mohammad Khursheed

Shares of the company, which withdrew its outlook in March due to an escalating COVID-19 pandemic, rose as much as 4% in early trading.

Deere’s fresh forecast comes more than a month after President Donald Trump announced a $19 billion relief program to help U.S. farmers cope with the impact of the health crisis. The company’s sales were likely to benefit from the additional liquidity, analysts have said.

“Deere noted signs of stabilization (in farm equipment sales) despite the week farm sentiment,” said Jefferies analyst Stephen Volkmann, adding that fiscal 2020 North American sales outlook of a decline of 10% was “surprisingly benign”.

The company said it expects farm and turf equipment sales to fall between 10% and 15% this year. According to Jefferies, the midpoint is better than a 14% drop estimated by analysts.

Deere typically sees a pick-up in sales of farm equipment after January as farmers start planting fields. That likely helped second-quarter demand for farm machinery hold up better than sales of construction equipment.

It forecast 2020 profit in a range of $1.6 billion to $2 billion, down 39% to 51% from a year earlier.

In the quarter ended May 3, farm and turf machinery sales fell 18% to $5.97 billion and construction and forestry equipment sales dropped 25% to $2.26 billion.

Net income fell 41% to $666 million, or $2.11 per share in the quarter, but beat analysts’ average estimate of $1.62 per share, according to IBES data from Refinitiv.

Equipment sales declined 20% to $8.22 billion, topping expectation of $7.69 billion. (bit.ly/2A3mEn2)

Reporting by Ankit Ajmera and Shreyasee Raj in Bengaluru; Editing by Arun Koyyur

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