Tags: Deere | profit | Forecast | sales

Deere Raises Full-Year Profit Forecast as U.S. Sales Gain

Wednesday, 16 May 2012 09:57 AM

Deere & Co., the largest maker of agricultural equipment, raised its full-year earnings forecast and posted a fiscal second-quarter profit that topped analysts’ estimates after higher crop prices supported U.S. farm incomes.

Net income climbed to $2.61 a share in the quarter ended April 30 from $2.12 a year earlier, Moline, Illinois-based Deere said today in a statement. That beat the $2.53 average of 18 estimates compiled by Bloomberg. Profit in the 2012 fiscal year will be $3.35 billion, compared with $3.28 billion Deere projected in February and the $3.24 billion average of 15 estimates.

“This is a clean, sales-driven, beat-and-raise quarter,” said Joel Levington, managing director of corporate credit at Brookfield Investment Management Inc. in New York, who personally holds some Deere shares. “We continue to view the company as extremely well positioned to benefit from the secular and cyclical demand for higher-quality food goods.”

Deere is selling more machines such as tractors after a three-year rally in corn and soybean prices pushed 2011 farm receipts to a record in the U.S., 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.

‘Positive’ Conditions

Deere gained 1.3 percent to $77.62 at 8:21 a.m. in New York before the start of regular trading.

Net income in the quarter rose 17 percent to $1.06 billion from $904.3 million. Equipment sales advanced 13 percent to $9.4 billion from $8.3 billion, compared with the 15 percent gain that Deere forecast in February.

The company reiterated that equipment sales will gain about 15 percent for the year. Industrywide farm equipment sales in the U.S. and Canada will increase more than 10 percent, it said.

“Conditions remain positive and demand continues to be strong, especially for high-horsepower equipment” in the region, Deere said.

U.S. farm cash receipts, the primary driver of agricultural-machinery purchases, will rise to $375.3 billion this year from $374.2 billion in 2011, Deere said in a presentation on its website today.

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.

Argentina ‘Uncertainty’

European industry sales will climb as much as 5 percent as improvements in the grain, livestock and dairy sectors outweigh economic concerns, Deere said. 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.

Sales in the Commonwealth of Independent States will be “considerably higher,” up “moderately” in Asia and down as much as 10 percent in South America because of drought hurting crops in the region and “uncertainty” in Argentina, Deere said.

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Wednesday, 16 May 2012 09:57 AM
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