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Deere shares fall after company misses earnings and cuts outlook

John Deere tractors are for sale at a dealership in Longmont, Colorado, U.S., February 21, 2017. REUTERS/Rick Wilking/File Photo

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Aug 19 (Reuters) – Deere & Co (DE.N) on Friday revised its full-year profit outlook after missing Wall Street’s profit forecast as the world’s largest equipment maker agriculture was struggling with shortages of parts and semiconductors resulting from supply chain constraints.

Shares of the company were down about 5% in premarket trading.

High inflation, logistical bottlenecks and deteriorating global economic conditions weighed on output from industrial manufacturers, putting pressure on margins and dampening production.

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“Our results reflect higher costs and production inefficiencies due to the difficult supply chain situation,” said John May, chief executive of the company, which also makes transmissions and diesel engines.

Staple crop prices hit decade highs between April and June, encouraging farmers to spend on new equipment. Still, Deere has struggled to meet demand as supply issues have yet to stabilize, analysts said.

“Supply chain issues may simply be keeping Deere from producing, a trend we’ve seen all year,” DA Davidson chief executive Michael Shlisky said in an emailed note.

The Moline-based company revised its full-year net profit forecast to between $7.0 billion and $7.2 billion, down from its previous outlook of $7.0 billion to 7. $4 billion.

It reported net income of $1.88 billion, or $6.16 per share, for the quarter ended July 31, below analysts’ estimates of $6.69 per share, according to Refinitiv IBES data.

Sales of $13.0 billion beat analysts’ forecasts of $12.78 billion.

With order books full for 2023, year-on-year revenue growth could indicate that supply chain issues will begin to ease ahead of next year’s planting season.

“If the supply chain has improved enough that they beat revenue this quarter, albeit very inefficiently, that means there’s a good chance the worst of the supply chain problem will be behind them,” said Matt Arnold, equity analyst at Edward Jones.

Total net sales and revenue increased approximately 22% to $14.10 billion.

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Reporting by Aishwarya Nair in Bengaluru and Bianca Flowers in Chicago; Editing by Krishna Chandra Eluri and David Holmes

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