“Third-quarter results reflected the high degree of uncertainty that continues to overshadow the agricultural sector”, John Deere CEO Samuel Allen said Friday, weighing in on a lackluster set of quarterly results that featured a 3% slide in sales.
Among other things, investors initially weren’t enamored with Deere’s guidance cut. The company now sees equipment sales rising 4% in fiscal 2019, versus 5% previously.
The company also trimmed its profit forecast to $3.2 billion from $3.3 billion three months back.
Allen’s assessment of the prevailing environment for the farm community is anything but rosy. “Concerns about export-market access, near-term demand for commodities such as soybeans, and overall crop conditions, have caused many farmers to postpone major equipment purchases”, he went on to say.
In case it’s somehow unclear, “concerns about export-market access” is a reference to the trade war.
In the face of falling margins, Deere is embarking on a cost cutting effort. “We are fully committed to the successful execution of our strategic plan focused on achieving sustainable profitable growth”, the company said in a press release. “In support of the strategy, we are conducting a thorough assessment of our cost structure and initiating a series of actions to make the organization more structurally efficient and profitable”.
That, frankly, doesn’t bode particularly well, although to the extent it’s ultimately successful, it’s positive for shareholders, one supposes. Deere has woefully underperformed the S&P in 2019 and flareups in the trade war have spelled bad news for the shares.
The stock sank in the pre-market, but subsequently bounced after regular trading got underway (bottom pane), so who knows, maybe Friday will turn out to be a good day.
Regardless of the how the shares trade into the weekend, the guidance cut and generally downbeat assessment of the agricultural sector is indicative of the pain the trade war is inflicting – in some cases on the very people it’s ostensibly designed to benefit.
Allen did note that despite the uncertainty, “general economic conditions remain positive”.
Don’t show Sam the yield curve.
Love your headline photo!