(Reuters) – U.S. tractor maker Deere & Co. forecast strong earnings on Wednesday for the coming fiscal year as it reported fourth-quarter results that exceeded analyst expectations amid improving demand for farm machinery.
Deere expects higher demand for large equipment to push up sales at its agriculture and turf division in the U.S. and Canada by 5-10 percent in 2018.
The company generates 70 percent of sales from agricultural equipment and around 60 percent of sales from the North American farm equipment market.
But sales in North America have been held down, with U.S. farmers tightening belts in the face of four years of global oversupply that has pushed down grain prices and farm incomes.
Read Also
Artificial intelligence put to work on extension
Farm Credit Canada and Results Driven Agriculture Research (RDAR) have unveiled a generative artificial intelligence tool called Root
With farmers buying equipment again to replenish aging fleet and large agriculture new equipment inventories at near multi-decade lows, some analysts expect any improvement in grain prices to further lift Deere’s sales.
Sales in tractors and combines in South America are forecast to be flat to up 5 percent next year.
The company’s construction and forestry division reported a 37 percent jump in sales in the latest quarter.
Deere expects worldwide sales of construction and forestry equipment to surge 69 percent in 2018, aided by an improving global economy, higher housing starts in the U.S. and increased activity in the oil and gas sector.
The acquisition of Germany’s Wirtgen Group is estimated to add about 54 percent to the construction and forestry division’s sales next year.
Wirtgen, which manufactures road construction and mineral technology equipment, was bought by Deere this year for $5.2 billion. The deal is expected to close in December.
