Deere & Co's stocks registered a new record late Friday, after the company posted a surprise hike in its first-quarter sales. But, the world's biggest farm equipment manufacturer warned the coronavirus scare would affect earnings in the second quarter.
The company's stock rallied 6.5 percent after an unexpected climb in profits in the quarter to December. Deere's earnings per share of $1.64 were almost 75 percent ahead of Wall Street's projections and rising 5.9 percent from last year.
The company also maintained its revenue guidance for 2020, adding that confidence among US farmers, its main client foundation, had improved as a result of the China-US trade deal, but was still muted.
Market observers anticipated $1.25 in EPS and $6.409 billion in total sales, according to figures released by Refinitiv. The company's shares settled up 7 percent and set a new intraday peak during Friday's after-hours trade.
According to chief executive officer John May, John Deere's first-quarter results showed early indications of "stabilization in the US farm sector." The company and other major agriculture firms have taken a huge blow from the trade showdown between Beijing and Washington, which has left farmers unsure of how big the market for their goods will be.
When Deere posted its fourth-quarter performance in November, it trimmed down its fiscal year net sales guidance to $2.6 billion to $3 billion from $3.1 billion previously. The company also estimated that its global sales of agriculture equipment would plunge 5 percent to 10 percent in the fiscal year 2020. As one reason for the weak guidance, it cited "lingering trade frictions."
The Moline, Illinois-headquartered company disclosed an early delivery program for its combined wrapped up this year with a low single-digit rise in the US. The company described the tractor order for this year as "healthy." Illinois-based Morton Industries, which supplies materials to Deere, Caterpillar Inc, and Komatsu Ltd, said clients are helping the company to acquire the affected components locally, but the prices of domestic vendors are higher.
Deere sounded relatively optimistic about the fundamentals of its flagship farm machine operations. Specifically, the company announced it had a very "strong finish" to its fourth quarter, while its revenue rose 6 percent year-on-year in the same period.
Furthermore, Deere said that the total inventory of both soybeans and corn had shrunk, while US farmers' total cash income had increased 8 percent, year-over-year. Also, it declared that the age of American farm machines had reached their highest point in more than 10 years, likely forcing many farmers to purchase new equipment.
