Deere & Co. stock skidded 5 percent Tuesday after third-quarter earnings posted by the farm- and construction-equipment maker were sharply lower than Wall Street expected.
The Moline-based manufacturer said it earned 41 cents a share, while industry analysts had been expecting earnings of about 60 cents a share in the period ended July 31.
Deere`s stock fell $2.50, to $47, on the New York Stock Exchange.
Earnings dropped 72 percent, to $31.3 million, or 41 cents a share, from $114 million, or $1.50 a share, in the fiscal 1990 quarter. Revenue fell 13 percent, to $1.79 billion from $2.05 billion a year earlier.
Contrasting with the equipment side, net income of credit operations rose to $21.7 million from $18.4 million, and insurance and health-care operations increased to $7.6 million from $6.1 million.
”In hindsight, we really should have expected these results,” said Robert McCarthy Jr., analyst with Chicago-based Duff & Phelps Inc. ”With the recession, North American sales of Caterpillar have been running more than 20 percent below a year ago, and Cat is a proxy for the (construction equipment) industry.”
He also said severe price competition from J I Case, which is attempting to reduce bloated inventory, affected Deere`s farm-equipment results.
McCarthy said that though the construction equipment business may have hit bottom, ”the tunnel is proving longer than expected and there is no light in sight yet.” Deere doesn`t expect conditions to improve soon, either.
Last week, Deere began tough labor negotiations with the United Auto Workers to replace a contract that expires Sept. 30. In the first nine months of the fiscal year, Deere laid off more than 1,400 workers, slashed production 12 percent and reduced inventories. Deere`s work force was 37,000 as of July 31.
”The outlook for North American agriculture for the remainder of this fiscal year and into early 1992 has become somewhat less favorable, and we expect farmers to remain cautious in making new-product purchase decisions,” said Chairman Hans Becherer in a statement.
Fourth-quarter demand for industrial and lawn-care equipment will be less than a year earlier, he said, but a moderate improvement in the economy will gradually benefit those sectors.
Becherer said total production, reflecting lower than anticipated sales, is expected to be down 17 percent in fiscal 1991 from 1990.
With lower volume and continuing price competition, he said fourth-quarter results will be off significantly from a year earlier.
In the first nine months, Deere reported that net income fell to $61.3 million, or 80 cents a share, from $336.6 million, or $4.44 a share. Revenue declined to $5.15 billion from $5.81 billion.
