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Deere shares hit record high, after results, outlook beat forecasts

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Deere & Co shares set a record high after the machinery giant unveiled results and forecasts ahead of market expectations, fuelled by a improved growth in agricultural equipment.

 

Shares in the maker of John Deere machinery soared 4.9% in early deals to an all-time high of $146.00, before easing back to $144.03, up 3.4% on the day.

 

The gains followed the group’s release of results for the three months to October 29, the fourth quarter of its financial year, showing earnings up 79% at $510.3m, equivalent to $1.57 per share – ahead of the $1.47-per-share result that Wall Street had expected.

 

And for the new financial year, Deere & Co forecast earnings of “about” $2.6bn, roughly $300m ahead of market expectations, on sales which it said were seen rising by 19%, implying a figure of some $35.4bn.

 

Investors have forecast sales reaching $28.1bn.

 

‘Compelling trends’

 

Samuel Allen, the Deere chief executive, terming “impressive” the group’s results, said that “our plans for helping meet the world’s increasing need for food, shelter and infrastructure are making further progress.

 

“These broad trends remain quite compelling and are widely considered to have ample staying power.”

 

He added that “John Deere is positioned to deliver stronger, more consistent results in the future”, after a financial year when the group had seen “strong results” from “actions to build a more durable business model”, while being boosted by improving farm and construction machinery markets too.

 

‘Higher demand for large equipment’

 

The extent of the group’s growth in 2018 is expected to come in part from the $4.9bn acquisition, expected to close next month, of Wirtgen Group, the German-based road construction machinery maker.

 

Wirtgen is seen boosting Deere’s sales by $3.1bn in the current financial year, and earnings by $25m.

 

However, Deere also forecast growth of some 9% in sales of agriculture and turf equipment, helped by growth in the Canadian and US markets of 5-10% for the industry as a whole for 2018, “supported by higher demand for large equipment”.

 

The comments come amid some signs of improvement in the region’s market for large farm machines, used mainly by arable farmers, with US sales of four wheel drive tractors last month up 15.0% - compared with an average pace of 2.1% for the previous nine months, according to the Association of Equipment Manufacturers.

 

US combine sales last month soared by 69%, having shrunk by 3.5% over the January-to-September period.

 

‘Improving conditions in dairy’

 

For the European Union, Deere & Co forecast industry sales growth of farm equipment coming in at “about” 5% for 2018, “due to improving conditions in the dairy and livestock sectors”.

 

Meanwhile, in South America, industry sales of tractors and combines were see growing by up to 5%,”as a result of continued positive conditions, particularly in Argentina”.

 

Asian sales were seen coming in “flat”, with strength in the Indian market offset by weakness in China.

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