Deere & Co., the largest maker of agricultural machinery, raised its full-year fiscal outlook as surging crop prices boosted farmers’ demand for new equipment.
Net income for the year will be between $5.7 billion to $5.9 billion, up from a prior range of $5.3 billion to $5.7 billion, Deere said Friday in a statement. The company posted net sales from equipment operations of $10.4 billion in the three months ended Aug. 1 that beat analysts’ average estimate.
Deere is seeing increasing fortunes in Europe and Asia, where the company said agricultural and turf sales will be more than previously expected. The Moline, Illinois-based firm forecasts its European ag and turf business to be 10% to 15% higher, up from a prior expectation of a 10% increase, while sales of the same segment in Asia will be up “significantly” after having only expected it to be “slightly” higher.
“There are pretty elevated grain prices around the world, and thanks to that farmers are increasingly confident in investing in their businesses,” Matt Arnold, an analyst at Edward Jones & Co., said in a phone interview. “They’re doing a really good job of translating that into a big expansion in earnings regardless of rising input costs and supply chain pressures.”
The tractor maker is benefiting from surging agricultural prices, with crops including wheat, corn, soybeans and coffee soaring to multiyear highs on rising global demand as economies start recovering from the pandemic and from supply concerns exacerbated by weather woes in key producing regions. Deere’s sales were aided by higher machinery prices, potentially countering rising raw material costs such as steel.
The world’s current farm-equipment fleet is the oldest in more than two decades, with low inventories and extended order books underpinning a possible multiyear recovery for agricultural equipment, according to Bloomberg Intelligence.
“Looking ahead, we expect demand for farm and construction equipment to continue benefiting from favorable fundamentals,” Deere Chief Executive Officer John May said in the statement.
Deere didn’t change it’s outlook for the U.S. and Canada, saying it still sees sales in the year rising about 25% for large agricultural equipment, with South America tractors and combines up about 20%. The company reduced its outlook for global forestry sales, expecting it up about 15% from a prior range of 15% to 20%.
Deere shares rose 1.7% at 9:30 a.m. trading in New York.
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