Farm machinery stocks have moved to the downside Wednesday morning. The selloff comes after Deere & Co. (DE) reported a drop in fourth quarter profit and issued its first quarter and 2009 fiscal year income guidance.
Deere stock dropped about 9% on the news, while AGCO Corp. (AG) shares declined about 8%. Shares of Lindsay Corp. (LNN) and Genzyme Corp. (GENC) each slid over 6%.
Around 10:55 am Eastern Time, shares of Deere were down $3.20 at $29.90 and AGCO stock was down $2.11 at $22.20. Meanwhile, Lindsay shares were down $2.72 at $37.63 and Genzyme stock was down 42 cents at $6.25.
Other stocks within the sector that were notably lower include CNH Global NV (CNH), Hitachi Ltd. (HIT), Caterpillar Inc. (CAT) and NACCO Industries Inc. (NC).
Before the opening bell on Wednesday, Deere reported a drop in its fourth quarter net profit, but revenues grew 21% on strong demand for agricultural machinery. In addition, the company provided earnings outlook for the first quarter and full year 2009.
The company posted net income of $345 million or $0.81 per share, lower than $422.1 million or $0.94 per share in the same quarter of last year. The company said its results included a pre-tax charge of about $50 million for previously disclosed factory shutdown.
On average, 16 analysts polled by First Call/Thomson Financial expected the company to earn $0.99 per share for the quarter. Analysts' estimates typically exclude one-time special items.
Worldwide net sales and revenues increased 21% to $7.40 billion from $6.14 billion in the year-ago period. Analysts had a consensus revenue estimate of $6.84 billion.
Net sales in equipment operations segment increased 24%, with growth of 16% in the US and Canada and 39% outside the United States and Canada. In the equipment division, agricultural sales increased by 43%, driven by higher shipment volumes and improved price realization.
Operating profit in equipment operations increased to $549 million from $511 million in the last year, benefiting from the favorable impact of higher shipment volumes and improved price realization, partially offset by increased raw material costs and higher research and development expenses.
The company's financial services reported net income of $69.9 million, compared to $96.9 million in the year-ago period. The decline in income was due to higher selling, general and administrative expenses, increase in average leverage, unfavorable currency translation and a higher provision for credit losses.
Deere's credit subsidiary, John Deere Capital Corp. posted net income of $57.7 million, lower than $82.8 million in the comparable period of last year. Net receivables and leases financed by John Deere were $18.84 billion, compared with $18.64 billion last year.
For the full year, the company reported net income of $2.05 billion or $4.70 per share, compared with $1.82 billion or $4.00 per share in the last year. Nineteen Wall Street analysts expected the company to report earnings per share of $4.89 for the year.
Annual net sales and revenues grew 18% to $28.43 billion from $24.08 billion in the year-ago period. Analysts had a consensus revenue estimate of $25.97 billion.
Looking ahead, the company expects to earn net income of $275 million for the first quarter and $1.9 billion for the full year 2009.
Subject to economic uncertainties, the company projects company equipment sales to be up 7% for the first quarter and about flat for the full year 2009.
Further, the company said it expects worldwide sales of agricultural equipments to increase about 5% for the full year 2009.
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