Deere & Co reported a lower third-quarter profit and tightened its annual profit forecast on Thursday, as U.S. tariffs dent margins on its farm equipment, sending the company’s shares down six per cent.
U.S. President Donald Trump’s tariffs have impacted companies across sectors, especially the manufacturing and industrial firms.
Farmers increasingly cautious
This has added to the woes of farm-equipment makers who were already grappling with slow demand due to a slump in crop prices for wheat, corn and soybeans in North America and farmers opting to rent machinery instead of buying.
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“Tariff uncertainty and deflated commodity prices have made farmers increasingly cautious in spending decisions and more hesitant to accept higher machinery prices,” said CFRA Research analyst Jonathan Sakraida.
Despite the gloomy demand environment, Deere CEO John May said the company was able to manage its inventory levels to help production match retail demand.
The company’s cost-saving measures also helped it top analyst estimates for third-quarter profit and revenue.
Peer CNH Industrial also topped second-quarter earnings estimates earlier this month, but warned that its annual sales could drop below last year’s levels.
Lower margins
Third-quarter operating profit from two of Deere’s largest units, which produce tractors, combines and construction equipment, roughly halved from a year earlier.
The company cut the higher end of its annual profit forecast to $5.25 billion (C$7.24 billion) from $5.50 billion, but kept the lower end intact at $4.75 billion.
In May, Deere said it expected tariffs to cost over $500 million (C$689.7 million) in 2025 before taxes, and that it was prepared to invest $20 billion in the U.S. over the next decade.
Global companies that reported between July 16 and August 8 projected a combined financial hit of $13.6 billion to $15.2 billion for the full year, a Reuters’ tariff tracker shows.
Trump has said the tariffs are a response to persistent U.S. trade imbalances and declining manufacturing power, and that the moves will bring jobs and investment to the nation.
Deere’s net income in the third quarter came in at $1.29 billion (C$1.78 billion), or $4.75 per share, compared with $1.73 billion, or $6.29 per share, a year earlier.
Analysts on average had expected the company to report a quarterly profit of $4.63 per share, according to data compiled by LSEG.
The company’s net sales fell about nine per cent to $10.36 billion (C$14.29 billion) from a year ago, more than analysts’ estimates of $10.31 billion.
— Reporting by Nathan Gomes in Bengaluru
