The machinery manufacturer, Deere & Co. released fourth-quarter earnings today that blasted through investors’ projections. The company also offered financial guidance for the next fiscal year, giving both investors and shareholders information about upcoming construction demand.
Fourth Quarter Results
When Wall Street had forecasted revenue of $7.56 billion with earnings of $1.49 per share, Deere surprised investors with a revenue of $9.73 billion with an EPS of $2.39 — $0.9 above expectations. Net income increased to $757 million, or $2.39 per share, for the quarter as compared to the previous year’s net income for the same period of $722 million, or $2.27 per share.
Net income attributable to Deere & Co. was $2.752 billion or, $8.69 per share, lower than last year’s $3.253 billion or $10.15 per share. The Moline-based manufacturer’s global net sales slipped 2% to $9.731 billion for the quarter while leading to a fall of 9% to $35.540 for the whole year.
Equipment operations net sales remained stable at $8.659 billion for the quarter and $31.272 billion for the year as compared to the corresponding values of $8.703 billion and $34.886 billion for the previous year. Impairment charges and employee-separation costs of $211 million and $458 million after-tax, respectively, had a great impact on the net income of the fiscal year 2020, according to the company.
Positive Financial Outlook
The world’s largest farm equipment manufacturer predicts that conditions in the farm economy would improve while construction and forestry markets would be stabilized in the next year. With these expectations, Deere estimates net income of $3.6 billion to $4 billion for the new fiscal year.
Deere estimates the global sales for agriculture and turf equipment to gain around 10% to 15% more than in 2020. While the sales of agricultural equipment in the U.S and Canada markets are expected to increase by 5% to 10% in the following year.
Improving Farm Economy
Since early August, the limited supplies of grains and the growing demand from China have driven the prices of corn and soybeans in the U.S by a third. As baking increased during the time, wheat prices also shot up by 22%. The increase in grain prices comes after four years of low prices due to a surplus of inventory in the agriculture sector.
Moreover, this year has seen record federal payments to farmers since the last nine years, amounting to $51.2 billion. What’s more, is that there has been an increasing need for farmers to replace old tractors which has increased the demand for Deere’s products.
The firm’s shares have rocketed 31% since its last reporting period in late August. The shares were up 2.4% to $267.90 in pre-market trading.
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