American farmers are nervous about the US trade war with China. That’s a big problem for Deere.
The agricultural equipment company reported earnings and sales that missed Wall Street forecasts Friday, and Deere lowered its outlook.
Overall revenue fell 3% from a year ago. The results “reflected the high degree of uncertainty that continues to overshadow the agricultural sector,” said Samuel Allen, Deere’s CEO, in a statement.
Allen didn’t cite China specifically as a reason for the shortfall. But he alluded to the trade war, saying that “concerns about export-market access [and] near-term demand for commodities such as soybeans,” were among the reasons that farmers decided to postpone buying tractors and other equipment.
China said earlier this month that companies based there would stop buying US agricultural exports.
Shares of Deere (DE) did rise 4% in early trading Friday — a day where the broader market rebounded following a tumultuous week. But Deere (DE) has missed out on the Wall Street rally this year, falling nearly 1%. Rival equipment company Caterpillar (CAT) has taken a hit too, dropping 8%.
Still, there was some good news from Johnny Tractor. Despite the concerns in the heartland, Allen said that “general economic conditions remain positive.” That’s boosting its construction and forestry business, which accounts for 30% of Deere’s total sales.
But the growth in construction and forestry isn’t enough to offset the concerns about US farmers pulling back on their purchases. Deere generates nearly 60% of its overall revenue from sales of agricultural equipment.
