MOLINE, Ill. - Deere posted a 17 per cent spike in second quarter profit Wednesday and boosted its outlook for the year, predicting record-high global demand for its signature tractors, harvesters and seeders.
Analysts had been anxiously awaiting Deere's take on the year going forward, with the potential for unprecedented crop production lowering commodity prices.
But Deere said that it expects sales for the current quarter to rise 25 per cent, easily outpacing Wall Street predictions.
The world's largest producer of agricultural equipment topped expectations for the quarter that just ended as well. But its revenue for the second quarter fell slightly short of its own growth expectations and shares fell in midday trading.
The company earned $1.06 billion, or $2.61 per share, up from $904 million, or $2.12 per share, in the same quarter last year.
Revenue jumped 12 per cent to $10 billion, from $8.9 billion.
"Our results are a reflection of positive conditions in the global farm economy, which is continuing to show impressive strength and endurance," Samuel Allen, the company's chairman and chief executive, said in a statement.
Last week, the U.S. Agriculture Department predicted this year's corn production will hit a record 14.8 billion bushels. And corn exports between September and August 2013 are expected to hit 1.9 billion bushels, due to steadily increasing demand from China.
China became the top market for U.S. agricultural goods last year, purchasing $20 billion in U.S. agricultural exports.
And booming farm production has manifested itself in Deere's numbers.
Equipment sales in the U.S. and Canada rose 18 per cent, while overseas sales increased 6 per cent.
Global sales of agricultural and turf equipment rose 11 per cent to $7.74 billion, and construction and forestry equipment sales jumped 26 per cent to $1.67 billion. Deere said both businesses got a boost from higher shipment volumes and pricing improvements.
The strong earnings arrive even as unfavourable exchange rates reduced international sales growth by four percentage points.
Revenue from Deere's financial services segment, in which it offers crop insurance, loans and other aid, rose 3.9 per cent to $109.2 million, as the company's credit portfolio improved.
For the current quarter that ends in July, Deere expects equipment sales to jump 25 per cent from a year earlier, indicating a forecast of $9.65 billion. That's well above what Wall Street is predicting for total sales, including the financial services segment. Analysts polled by FactSet see overall sales of $9.11 billion for the quarter.
Deere & Co., based in Moline, Ill., raised its full-year profit prediction to about $3.35 billion and said it still expects equipment sales to increase about 15 per cent this year, implying sales of $9.09 billion. Deere previously predicted a profit of $3.28 billion. Analysts predict net income of $3.24 billion on sales of $33.97 billion for the fiscal year ending in October.
The company's stock, which rose initially after the results, was down more than 3 per cent Wednesday, losing $2.44 to close at $74.18. Shares have fallen off slightly since hitting a year high of $89.70 in February. The stock's 12-month low, hit in October, was $59.92.