Deere shares drop after tractor maker cuts forecast, citing ‘lingering trade tensions’

Shares of Deere dropped on Wednesday after the manufacturing company issued lower guidance as trade tensions continue to slow equipment purchases by farmers.

The Moline, Illinois-based company said it now expects net income of $2.7 billion to $3.1 billion in fiscal 2020, lower than average analyst estimates of $3.5 billion for the year, according to Refinitiv.

Deere said it sees agricultural equipment sales falling between 5% and 10% in fiscal year 2020. Construction equipment sales are expected to decline as much as 15% next year, the company said.

“Lingering trade tensions coupled with a year of difficult growing and harvesting conditions have caused many farmers to become cautious about making major investments in new equipment,” Deere CEO John May said in a statement.

Deere reported an adjusted profit of $2.14 per share for the third quarter, down from $2.30 per share last year. That compares with average analyst estimates of $2.13 per share, according to Refinitiv.

Shares of Deere fell nearly 4% in premarket trading on Wednesday.

The U.S. and China have engaged in a trade war for a year and a half. Punitive tariffs that the two countries slapped on one another’s goods have taken a bite out of the world’s two largest economies. The U.S. manufacturing particularly experienced weakness as a key gauge for the sector started showing contraction a few months ago.

“John Deere’s performance reflected continued uncertainties in the agricultural sector,” May said.“General economic conditions have remained favorable. This has supported demand for smaller equipment and led to solid results for Deere’s construction and forestry business, which had a record year for sales and operating profit.”

— Reuters contributed to this report.

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