Deere & Co's Strong Quarterly Results

Deere & Co's Strong Quarterly Results

over 3 years ago2 mins

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Deere & Co reported quite the fruitful quarterly harvest on Friday: the American agricultural equipment maker’s revenue and profit beat investors expectations 🚜

What does this mean?

Sure, Deere’s revenue was 11% lower than the same time last year and profit was down 10%, but those were smaller drops than investors were expecting. Maybe they hadn’t accounted for the fact that farmers still needed to replace old machinery, or that US government subsidies had encouraged them to buy more of what they needed 🇺🇸 Or maybe they’d overlooked China’s agreement to step up its purchases of US soybeans, which might’ve given the countryfolk an incentive to spruce up their kit.

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All that might explain why the equipment-maker raised its earnings forecast for the rest of its financial year. That’s only one more quarter, admittedly, but plenty of the world’s biggest companies have opted out of making any predictions what with the looming uncertainty of coronavirus 🦠 Then again, Deere did warn that a resurgence of the pandemic could make its prediction meaningless...

Why should I care?

Deere’s stock initially rose 5% on Friday, likely because of its tidy update. Optimistic analysts were feeling good about the company’s relative stability this year, and might be hoping the lockdown-driven gardening boom will keep demand for its products going strong 🌷 Not least because Deere’s managed to offset falling sales by cutting costs – something other industrial giants, like Caterpillar, have struggled to do as effectively.

Source: CNBC
Source: CNBC

Industrial companies like Deere and Caterpillar are “economic bellwethers”. That is to say, demand for Deere’s products gives a good indication of how busy US farmers are keeping, while demand for Caterpillar’s machinery – which is sold in the construction and mining sectors – offers clues about global economic activity and growth 🌎 And that’s precisely why investors keep such close tabs on their updates.

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