Bloomberg News

Deere Raises Full-Year Forecast as Net Tops Analysts’ Estimates

May 16, 2012

Deere & Co. (DE:US), the world’s largest maker of agricultural equipment, raised its full-year earnings forecast and posted fiscal second-quarter profit that topped analysts’ estimates after higher crop prices supported farming incomes in the U.S.

Net income climbed to $1.06 billion, or $2.61 a share, in the quarter ended April 30, from $904.3 million, or $2.12, a year earlier, Moline, Illinois-based Deere said today in a statement. That beat the $2.53-a-share average of 18 estimates compiled by Bloomberg. Equipment sales rose 13 percent to $9.4 billion from $8.3 billion, compared with the 15 percent gain that Deere forecast in February.

Profit for the full fiscal year will be $3.35 billion, compared with $3.28 billion Deere forecast in February and the $3.24 billion average of 15 estimates. The company reiterated that equipment sales for the full fiscal year will gain about 15 percent.

“In North America, major crop receipts are headed for another strong year after record levels in 2011,” Ann Duignan, a New York-based analyst for JPMorgan Chase & Co. who has a buy rating on Deere, said in a report May 14. “Europe continues its agricultural recovery.”

Deere is selling more tractors and other machinery after a three-year rally in corn and soybean prices pushed farm receipts to a record in the U.S. in 2011, its largest market. Higher equipment volumes in established markets will help Chief Executive Officer Samuel R. Allen as he also chases additional revenue in developing markets such as Brazil and China to reach a goal of $50 billion in sales by 2018.

U.S. farm cash receipts, the primary driver of agricultural-machinery purchases, will be $371.9 billion this year after rising to a record $381.4 billion in 2011, Deere said in a February presentation. That accumulated income will help farmers to continue to buy new machines, Duignan said.

While corn prices have dropped in the past two months after forecasts for a higher acreage this season, inventories are still tighter than historical averages and will support U.S. farm sales, Andy Kaplowitz, a New York-based analyst for Barclays Plc, said in a May 14 note.

Farm income in the European Union rose 6.7 percent in 2011 from a year earlier, according to Eurostat. British growers’ profit last year reached the highest since 1996, according to the U.K. government.

To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net.


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Companies Mentioned

  • DE
    (Deere & Co)
    • $83.32 USD
    • -0.42
    • -0.5%
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