Deere & Co., the world’s largest farm equipment manufacturer, forecast fiscal 2016 profit that beat analysts’ estimates even as lower crop prices reduce the money that farmers have to buy tractors and combines.
Net income for the year through October will be about $1.4 billion, the Moline, Illinois-based company said Wednesday in a statement. That was better than the $1.39 billion average of 18 estimates compiled by Bloomberg. Equipment sales will be down for a third year, falling about 7 percent, the company said.
The decline in prices for corn to soybeans has spurred farmers to cut back on purchases. The U.S. Department of Agriculture forecasts farm net income will drop 21 percent this year. Sales of large, expensive agricultural machinery are down and inventory remains above historical averages, portending more production cuts in 2016, according to Karen Ubelhart, a Bloomberg Intelligence analyst.
“The outlook for 2016 U.S. farm-equipment demand is dimming as financial conditions continue deteriorating,” Ubelhart said in a report last week.
Net income in the fiscal fourth quarter fell to $1.08 a share from $1.83 a year earlier, the company said. That’s more than the 75-cent average estimate. Equipment sales fell 26 percent to $5.93 billion, missing the $6.13 billion average estimate.
Shares were up 5.9 percent to $80.88 before the start of regular trading in New York.