Shares of Deere & Co., the world’s largest agricultural-equipment maker, tumbled the most in 12 weeks Wednesday on speculation that growth may be limited as corn and soybean prices decline from record highs.
Deere shares fell 3.5 percent to $90.68 at the close in New York, the biggest drop since Nov. 21.
U.S. farm cash receipts for crops, one indicator for equipment sales, will fall 1.7 percent as corn and soybean prices decline, the Moline, Illinois-based company said today in a presentation on its website. Industrywide farm equipment sales in the U.S. and Canada will be unchanged to 5 percent higher in fiscal 2013, which ends Oct. 31, Deere said. The company got 64 percent of sales from that region in fiscal 2012.
“Many investors believe the agriculture market is near a peak,” Stephen Volkmann, a New York-based analyst for Jefferies & Co. who rates the shares hold, said in an e-mail Wednesday. “There is a hope that construction can drive the business ahead from here, but the construction part of the business was a bit disappointing or at least doesn’t appear to be a source of upside.”
While the company’s fiscal first-quarter earnings and 2013 profit forecast topped analysts’ estimates, the shares have dropped as “investors worry they don’t see the same upside” in the rest of the year, Matt Arnold, a St. Louis-based analyst for Edward Jones & Co., who has a buy rating on the shares, said Wednesday in a telephone interview.
Earnings will be about $3.3 billion for fiscal 2013, the company said in an earnings statement Wednesday. That exceeded its previous prediction of $3.2 billion and the $3.26 billion average of 16 estimates. Profit was $1.65 a share in the quarter ended Jan. 31, beating the $1.40 average of 17 estimates compiled by Bloomberg.
Deere Chairman and Chief Executive Officer Sam Allen has introduced a record number of new products and built factories from Brazil to China as higher commodity prices put more cash in farmers’ pockets in the last three years. In the U.S., where Deere is the market leader, crop-farming receipts are forecast to decline to $210.7 billion this year from $214.4 billion last year, Deere said Wednesday.
First-quarter net income increased 22 percent to $649.7 million from $532.9 million a year earlier. Equipment sales climbed 11 percent to $6.79 billion, compared with Deere’s November forecast for a 10 percent gain. Revenue from machinery gained 18 percent in the U.S. and Canada and 2 percent in the rest of the world.
For fiscal 2013, Deere said equipment sales will advance about 6 percent, more than its previous prediction of 5 percent.
The industry’s revenue in South America will rise as much as 15 percent, driven by Brazil, Deere said. Industry sales in the European Union will be down about 5 percent because of economic weakness and last year’s poor harvest in the U.K.
Most active corn futures climbed as high as $7.01 a bushel today on the Chicago Board of Trade, down from a record $8.49 in August. Soybean futures rose as high as $14.1775 a bushel after touching a record $17.89 in September.
U.S. farmers’ cash flow was helped by collecting a record $14.2 billion in insurance payments triggered by the worst U.S. drought since the 1930s, the USDA said in a Feb. 11 report on its website. Deere’s sales of four-wheel tractors and combines in December topped U.S. industrywide gains, the company said last month.
The company also has gained market share in Brazil, where it “outperformed” in tractors and combines last month, JPMorgan Chase & Co. said in a Feb. 7 report. Brazil is one of the countries Deere is focusing on as it aims to boost annual sales to $50 billion by 2018.
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