REUTERS — Deere and Co surpassed market estimates for quarterly profit late last month as a surge in crop and livestock prices encouraged farmers to splurge on tractors and combines.
The results sent shares of the world’s largest farm equipment maker three percent higher in pre-market trading and eased some fears around the impact of a worker strike that had hit Deere’s operations for about three weeks of the fourth quarter.
Higher corn and soybean prices this year have brightened the financial outlook for farmers with the U.S. Department of Agriculture projecting net farm income to rise 19.5 percent to an eight-year high of $113 billion in 2021.
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That has driven up sales of farm equipment despite price hikes by manufacturers. Deere’s sales of its large and medium equipment jumped 23 percent in the quarter, while sales of smaller farm and turf equipment rose 17 percent.
The Illinois-based company also signalled the boom was expected to continue, forecasting 2021 earnings of $6.5 billion to $7 billion. The midpoint of the range was higher than analysts’ estimates of $6.72 billion, according to Refinitiv.
“Unlike previous boom-bust replacement cycles, the agriculture equipment industry is in the midst of a much smoother demand environment,” Third Bridge senior analyst Patrick Donnelly said.
Deere recently agreed to a new deal with its United Auto Worker employees, ending the nearly six-week strike just ahead of the winter buying period during which farmers purchase equipment for the spring planting.
It raised prices by eight percent for its large and medium equipment orders in the quarter to offset rising inflation, helping fatten its margins.
Net income rose 69 percent to $1.28 billion, or $4.12 per share, in the quarter to Oct. 31, while analysts had expected a figure of $3.90 per share.
Deere’s equipment sales rose 19 percent to $10.28 billion but came in slightly below expectations.
