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Deere Reports Record Revenue but Tepid Outlook

Farm machinery manufacturer, Deere (NYSE: DE) reported second quarter earnings on Wednesday. Revenue came in at $1.08 billion or $2.76 per share–up from $1.06 billion or $2.61 the prior year. Analysts expected a profit of $2.72 per share making this a solid beat. In it’s release, the company noted,

“After a record-setting second quarter, John Deere is well on its way to another year of strong performance,” said Samuel R. Allen, chairman and chief executive officer. Second-quarter sales and income were the highest for any quarterly period in company history, he pointed out. “Deere’s results are a reflection of positive conditions in the global farm economy, which continues to show impressive strength. The company’s performance also offers further proof of the adept execution of our operating and marketing plans, which are aimed at expanding our global market presence.”

But in pre-market trading the stock is down 2 percent. The reason lies in the outlook.

“Deere’s near-term forecast is being tempered by lingering economic concerns in many parts of the world, which are restraining business confidence and growth,” Allen stated. “In addition, cool, wet weather in North America has delayed crop planting, slowed construction activity and hurt sales of turf-care equipment.”

This has to have agriculture investors a little nervous. In some large part, people think of climate change and global warming as an extremist view shared by extremist groups but this report shows that companies are seeing an impact from unpredictable weather patterns.

To be fair, Deere might be giving itself some room to account for unknowns like another drought, higher than average temperatures, or other unforeseeable events. Still, it’s notable that a company the size of Deere would mention these weather patterns as cause for concern.

Also of note, soon after the pre-market announcement, Deere traded down 11 percent and almost instantly rebounded to only a 2 percent loss. We’ll see if anything comes of that story as the trading day gets into full swing.

Disclosure: At the time of this writing, Tim Parker was long Deere.


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