CHICAGO – Deere & Co., one of the world’s largest farm equipment makers, said its quarterly earnings jumped sharply, driven in part by strength in its agricultural and construction equipment businesses.
Deere, whose shares rose four percent Aug. 17, also raised its full year earnings forecast.
The company said aggressive cost management is expected to offset a large part of the increased cost for steel and other materials.
Deere, based in Moline, Illinois, reported net income of $401.4 million US, or $1.58 per share, for its third quarter ended July 31, compared with net income of $247.5 million, or $1.02 per share, a year earlier.
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Analysts had expected Deere to report earnings of $1.51 per share, according to Reuters.
“They were better numbers on stronger volume and the fourth quarter a little better than expected,” JB Hanauer & Co. analyst Eli Lustgarten said.
“We know that 2004 is going to be a very good year with record levels of (U.S.) farm income.
“The only thing we can say for sure at the moment is that it looks like farm equipment has enough momentum to have a good year in 2005 versus 2004,” Lustgarten said.
The consumer business, however, was somewhat of a disappointment, he said.
Total net sales and revenue rose 23 percent to $5.42 billion in the quarter for Deere, which is known for its green and yellow tractors. Deere also makes forestry equipment, and lawn care products such as mowers.
Deere said equipment sales revenue rose mainly on increased shipments, higher prices and favourable currency transactions.
Agricultural equipment sales rose 34 percent to $2.64 billion. Commercial and consumer equipment sales rose three percent to $1.11 billion.
Construction and forestry equipment sales rose 40 percent to $1.1 billion.
Deere said that U.S. farm cash receipts are forecast to reach a record level in 2004 and to remain strong in 2005.
The farm equipment market started to turn around in 2003 because of higher prices for commodities such as corn and soybeans.
Analysts remain cautious about the length of the upturn with an eye toward commodities prices, rising U.S. interest rates, high fuel prices and a tax depreciation incentive due to expire at the end of the year.
Deere raised its fiscal 2004 net income forecast to about $1.3 billion from $1.2 billion issued in May. It also expects equipment sales to be up about 32 percent in 2004 from the previous year.
That forecast would translate to net income of about $5.13 per share, based on 253.5 million diluted shares outstanding on July 31. Analysts on average expect Deere to earn $4.81 per share for fiscal 2004.
