Shares of Deere & Co. moved into the red Friday after the farm and construction equipment maker’s third-quarter profit missed Wall Street’s target on higher costs and production inefficiencies, while it posted stronger-than-expected revenue.
Deere DE, -1.70% said its profit for the three months ended Aug. 1 increased by about 13% to $1.884 billion or $6.16 a share, from $1.67 billion, or $5.32 a share, in the year-ago period.
The company fell short of the analyst estimate of $6.65 a share, according to data from FactSet.
Revenue increased by about 22.3% to $14.1 billion, beating the consensus view of $12.93 billion, according to FactSet.
Shares of Deere & Co. fell 1.7% in morning trading. It has rallied 5.5% in 2022, compared with an 11.0% drop by the S&P 500 index. SPX, -1.39%
CEO John C. May said employees made “extraordinary efforts” to increase factory output and get products to customers “under challenging circumstances.”
The company’s results reflect higher costs and production inefficiencies “driven by the difficult supply-chain situation,” May said.
Cowen analyst Matt Elkott reiterated a market perform rating on Deere and described the quarter as “noisy,” and said the company’s results affirm the cautious view on the stock.
“Based on what we believe was decidedly improving sentiment from both the buy side and sell side leading up to the results, anything short of a near-banner quarter could lead to pressure on shares, and this is not a near-banner quarter,” Elkott wrote in a research note.
Prior to Friday’s decline, Deere’s stock had run up 27.3% from its 18-month closing low of $289.14 on July 6.
Looking ahead, Deere said it expects to generate $7.0 billion to $7.2 billion in 2022 net income. The company lowered the top end of its view from $7.4 billion.
It now expects the overall U.S. agriculture and turf market to rise about 15%, lower than its earlier estimate of about 20%. It kept its estimate of roughly 10% growth for the construction and forestry sector.
Among Deere’s business segments, production and precision agriculture sales jumped 43.4% to $6.1 billion, above the FactSet consensus of $5.79 billion; small agriculture and turf sales rose 15.5% to $3.64 billion to beat expectations of $3.58 billion; and construction and forestry sales grew by 8.4% to $3.27 billion, missing expectations of $3.42 billion.
Tomi Kilgore contributed to this report.