Deere & Co., the largest maker of agricultural equipment, fell the most in three months after lowering its forecast for U.S. farmer revenue, an indicator of demand for its signature green and yellow machines.
Deere dropped 3.2 percent to $86.21 at 10:25 a.m. in New York. The shares earlier declined as much as 3.8 percent, the biggest intraday drop since Nov. 9. Total U.S. farm receipts will be $371.9 billion in 2012, down from a November forecast for $374.2 billion, as corn, wheat and soybean prices decline, the Moline, Illinois-based company said today in a presentation accompanying its fiscal-first quarter results.
“There is concern about moderation, if not peak, in agricultural equipment,” Larry De Maria, a New York-based analyst for William Blair & Co. who has a “market perform” recommendation on the shares, said in an interview today.
Farm income in the U.S., Deere’s largest market, will fall 6.5 percent in 2012 from last year’s record $98.1 billion as rising crop acreage and costs trim profits, the Department of Agriculture said Feb. 13. U.S. demand for combines has slowed, with retail sales dropping 50 percent in January from a year earlier, the Association of Equipment Manufacturers also said Feb. 13.
The company today reported fiscal first-quarter profit and forecast 2012 earnings that topped analysts’ estimates. Net income climbed 3.7 percent to $532.9 million, or $1.30 a share, from $513.7 million, or $1.20. That topped the average $1.24-a- share profit estimate of 18 analysts surveyed by Bloomberg. Sales advanced 11 percent to $6.77 billion from $6.12 billion, beating the average estimate of $6.46 billion of 14 analysts.
Deere raised its fiscal 2012 profit forecast to about $3.28 billion from $3.2 billion previously. The average of 15 estimates was $3.18 billion. The company said sales of its forestry and construction machines will increase 15 percent for the full year.
The farm-equipment industry’s sales in the U.S. and Canada will rise about 10 percent in fiscal 2012, the higher end of Deere’s previous forecast, as “overall conditions remain positive and demand continues to be strong, especially for high- horsepower equipment,” the company said.
Industry-wide sales in the European Union and Western and Central Europe will be up as much as 5 percent on “favorable” conditions in the grain, livestock and dairy sectors, Deere said. Its previous forecast was for sales to be unchanged.
The U.S. and Canada combined comprise Deere’s largest market, followed by Europe, according to the company’s website.
Chief Executive Officer Samuel R. Allen is seeking to boost sales 56 percent to $50 billion by 2018 from a record $32 billion in fiscal 2011. The company also has a target to increase the proportion of revenue from outside the U.S. and Canada to 50 percent from 39 percent last year.
The company in the last year has introduced a record number of tractors, combines and harvesters to court farmers overseas. It has also announced plans to build seven factories in China, Brazil and India.
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