Yahoo Finance How Deere’s Revenues Slid on Discounts
Deere's Fiscal 2Q16 Results Are Out, but No One's Celebrating
Deere sales performance in fiscal 2Q16
Deere & Company’s (DE) consolidated revenues fell by 3.6% YoY (year-over-year) to $7.9 billion in fiscal 2Q16. A positive price realization of 1% was offset by a 2% impact of currency translations. The remainder of the declines were due to lower shipment volumes, sales incentives offered for equipment purchase, and a less favorable product mix.
Net sales in equipment operations, which constituted 90% of the sales in the quarter were down by 4% to $7.1 billion. Investors should note that similar declines were seen among competitors Caterpillar (CAT) and AGCO (AGCO). Equipment operations consist of two segments: Agriculture & Turf Equipment and Construction & Forestry.
Deere’s farm equipment sales steady
Despite the somewhat distressed environment for farm equipment demand, Deere’s sales in the agriculture, or ag, equipment segment came in flat YoY at $5.7 billion. Ag (DBA) equipment sales were aided by order timing issues in which the second quarter pulled in a bit of the production from the third quarter in addition to the first quarter shipments that had moved into fiscal 2Q16. Positive price realization in the segment was offset by lower shipment volumes, currency translation impact, and a less favorable product mix.
Construction equipment sales disappoint
Net sales in the construction (ITB) and forestry segment slumped by 16.4% YoY to $1.4 billion and became the major contributors to the overall decline in sales. Sales declined as Deere offered higher incentives in the highly competitive North American market.
Shipment volumes were also low due to a glut of construction equipment machinery as weak conditions in the energy market have led to the redeployment of construction equipment from energy producing regions to construction end markets.
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