Deere & Co shares hit a record high in early deals after the farm machinery giant said its full-year earnings would fall less markedly than previous thought, as fears for the key US market ease.

The maker of John Deere equipment, which is the world’s largest farm machinery maker, said it was, after a “strong performance” in the quarter of July 28, now expecting its results for the year to October to come in at $2.25bn.

That is above the forecast of $1.6bn-2bn the group forecast in May, although would remain below the year-before result of $3.25bn, and $2.7bn-3.1bn result that Deere had initially expected, before the Covid-19 pandemic struck.

Deere shares rose by 5.2% to an all-time high of $201.10 in early deals in New York, outperforming a flat market, as measured by the S&P 500 index.

US worries ease

The earnings upgrade reflected an expectation that Deere’s global agricultural equipment sales would fall by “about 10%” in its financial year, compared with a previous expectation of a decline of 10-15%.

Conditions in the group’s key Canada and US ag market had recovered such that it was now expected to shrink by 5-10% over the year, rather than 10% drop previously expected.

Deere curtailed too to 25%, from 30-40%, the sales fall expected in its smaller construction and forestry machines division.

‘Strong performance’

Furthermore, the group highlighted results for the latest quarter which showed earnings of $811m – down 10% year on year but, equivalent to $2.57 per share, far exceeded analyst expectations of a $1.26-per-share result.

The group had “delivered a strong performance in the third quarter in the face of a serious global pandemic and uncertain market conditions,” said John May, the Deere chairman and chief executive.

Operating profit actually rose year on year, by 16% to $1.39bn, led by a 54% jump to $942m in the result at the agriculture division, as the group, in the face of the Covid-19 crisis, cut back on costs and raised prices.

“Operating profit increased primarily due to price realisation, and lower selling, administrative, and general expenses”, Deere said.

Job cuts

The group highlighted savings from “broad employee-separation programmes”, that will be completed in its current financial quarter “in support of its strategy to create a leaner, more agile organisation”.

The schemes, which will cost a one-off $175m, will save $175m in annual costs.