Deere beats profit targets as strong pricing, cost cuts counter slow demand
(Reuters) -Deere & Co beat analysts’ expectations for third-quarter profit on Thursday, as stronger pricing and cost control measures protected its margins from sluggish demand for its farm equipment, sending shares of the company up 4% before the bell.
U.S. machinery makers have succeeded in maintaining the price increases they implemented two years ago, a move that was prompted by supply chain complications and a surge in demand for industrial and agricultural equipment.
The higher prices have helped farm equipment makers to shield their profits from a slowdown in demand for new machines amid a decline in crop prices and high borrowing costs, which have also forced dealers to limit inventory restocking.
Deere maintained its 2024 net income at about $7 billion, even as U.S. farm incomes are forecast to plunge in 2024 due to a sharp decline in commodity crop prices, heightened production costs and shrinking government support.
Third-quarter sales in the company’s production and precision agriculture segment, which includes larger farm equipment, fell 25% to $5.1 billion due to lower shipment volumes, but were partially offset by price realization.
“In response to weak market conditions, we have taken steps to reduce costs and strategically align our production with customer needs,” CEO John C. May said.
Deere said in June it would cut an unspecified number of production jobs and reduce salaried employees to keep a tight lid on costs. The company has also taken steps to manage its inventory levels.
For the third-quarter, Deere reported a net income of $6.29 per share, compared with analysts’ average estimate of $5.63, according to LSEG data.
Its net sales and revenue decreased 17% to $13.15 billion.
(Reporting by Shivansh Tiwary in Bengaluru; Editing by Shinjini Ganguli)
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