Buoyant North American farm equipment sales, to farmers
gearing up for an important spring sowing season, led Deere & Co to a
forecast-beating quarter, and prompted the tractor giant to lift its forecast
for full-year profits.
The Illinois-based group, the maker of John Deere machinery,
reported a 22% jump to $650m in earnings for the November-to-January period, on
revenues up 9.7% at $7.42bn.
The earnings, equivalent to $1.65 per share, beat the
$1.40-a-share result expected by Wall Street - in contrast with earnings misses over the previous two quarters.
And the group raised by $100m, to $3.3bn, its estimate for
earnings for the full year, to the end of October, narrowly ahead of
expectations of $3.26bn.
North America strength
The earnings were "proof" of the group's "adept execution"
of its plans for global expansion, and exploiting strong agricultural market
dynamics, Samuel Allen, the Deere chief executive, said.
"Deere remains well positioned to earn solid profits in
today's fragile global economy."
However, while prospects for Asian and South American
markets had improved since the start of the financial year, it was on its home
turf that Deere performed best in the latest quarter, raising sales by 18%, compared
with 2% growth in the rest of the world.
Livestock vs arable
Indeed, the group raised to growth of "up to 5%", from "flat",
its estimate for the performance of the Canada-US farm equipment market in the
year to October.
"Continued strength in demand for large equipment such as
high-horsepower tractors and combines" was being only "partly offset" by "caution
in the US livestock sector", Deere said.
The orders for such cropping equipment come ahead of a
spring sowing season that the company estimated would see farmers plant 98.0m
acres with corn, 2.0m acres more than a preliminary US Department of
Agriculture forecast on Monday.
The estimate for soybean sowings, at 78.0m acres, was also 2.0m
tonnes above the USDA estimate, with a Deere figure of 10.0m acres for cotton
seedings a little less ahead.
The extra area would come in part at the expense of wheat,
for which Deere pegged area at 57.0m acres, 500,000 acres below the USDA
However, the group trimmed hopes for the former Soviet Union
market, which it now saw falling "slightly" over the full year, rather than expanding
"modestly" as previously expected.
And Deere ditched ideas of even a flat performance in the
European Union, foreseeing a drop of about 5% in industry sales, with wet
weather "negatively impacting demand" in the UK, and financial worries dragging
on regional economic growth.
Indeed, Mr Allen warned that the company's "near-term
outlook is being tempered by uncertainties over fiscal, economic and trade
issues that are undermining business confidence and restraining growth".
The caution helped restrain enthusiasm among investors, who
sent Deere shares down 3.5% to close at $90.68 in New York.