Deere & Co.’s third-quarter earnings on Friday missed Wall Street estimates, hurt by the US-China trade war that has dented the demand for its farm machines, forcing the company to revise down its full-year profit and sales growth forecasts.
The Moline, Illinois-based company now expects full-year net income of $3.2 billion on annual sales growth of 4%, lower than the $3.3 billion of income on sales up about 5% projected earlier.
This is the second cut to the full-year earnings outlook in the past three months.
“Concerns about export-market access, near-term demand for commodities such as soybeans, and overall crop conditions, have caused many farmers to postpone major equipment purchases,” said Chief Executive Officer Samuel Allen.
Deere’s shares were down 2% in premarket trade. China is one of the biggest export markets for US farmers.
However, the year-long tit-for-tat tariff war between the world’s two largest economies has slashed their earnings.
China imported $9.1 billion of U.S. farm produce in 2018,down from $19.5 billion in 2017, according to the American Farm Bureau.
US shipments to China of soybeans, the country’s most valuable farm export, sank to a 16-year low last year as Beijing mostly shifted purchases to Brazil, leaving American farmers with surplus.
A record-wet spring, meanwhile, has devastated a wide swath of the US farm belt and inflicted more economic pain on soybean and corn producers, particularly those whose fields were too wet to ever plant, dampening hopes of an improvement in farm income and equipment sales.
Deere said industry sales of agricultural equipment to be about the same as last year in the United States and Canada, which account for 60% of its overall business.
Sales in the region were earlier projected to be flat to up 5% earlier. In response to weak equipment demand, in May, Deere had announced a 20% production cut at its factories in Illinois and Iowa.
On Friday, the company said it was reviewing its cost structure and initiating a series of measures to remain profitable.
For the quarter ended July 28, Deere reported an adjusted profit of $2.71 per share compared with Refinitiv IBES’ average analyst estimate of $2.85 per share.
Sales at its agriculture & turf segment, which accounts for the bulk of the company’s revenues, declined 6% year-on-year to $5.95 billion in the quarter.
Overall, equipment sales during the quarter were down 3%.