NEW YORK (Reuters) — Deere & Co, the world’s leading maker of farm equipment, reported higher-than-expected quarterly profit on Wednesday, helped by international demand for large machines and a weaker U.S. dollar, but shares fell 2.3 percent amid disappointment over margins.
“With farmers doing well, expectations were high,” said analyst Brian Langenberg of Langenberg & Co. “When your biggest business has margins down because of raw materials prices, it’s not a surprise but it doesn’t make stocks go up.”
Deere shares were at $73.45, down from their Tuesday close of $75.16.
Deere also lowered its outlook for farm profits in Brazil, a key indicator for future equipment demand in a huge food exporting market even as it raised its full-year profit forecast.
Net earnings rose 15 percent to $712 million, or $1.69 per share, in the fiscal third quarter ended July 31, up from $617 million, or $1.44 per share, a year ago. Per-share profit beat analysts’ average estimates by 2 cents, according to Thomson Reuters I/B/E/S.
Sales rose 22 percent to $8.37 billion. Equipment sales were up 24 percent to $7.72 billion, also beating forecasts, with the weak U.S. dollar adding 6 percentage points to the revenue growth.
(For a graphic, click http://r.reuters.com/…)
International sales grew nearly five times faster than U.S. and Canadian sales in the third quarter. International equipment sales accounted for about 43 percent of total equipment sales in the quarter.
Moline, Illinois-based Deere said sales of high-horsepower farm machinery were boosting its results and sales of construction equipment were improving despite weak North American construction markets. It forecast full-year net income of $2.7 billion. In May, it forecast $2.65 billion and analysts are expecting $2.71 billion.
Long-term global demand for food, shelter and infrastructure will drive sales of Deere products, the company said. However, in the short-term, the outlook has grown more uncertain because of worries about the health of the economy and turmoil in financial markets.
The company cut its forecast for farm income in Brazil both this year and next, a key market for machinery makers since Brazil is a major food exporter.
Deere now expects Brazil farm net income of $20.2 billion this year and $21 billion next year, down from its May forecasts of $26.1 billion and $22.2 billion, respectively.
“On the call, we’re going to be asking about the raw (materials), and we’re going to be asking about South America,” Langenberg said.
Deere is the last of the big global farm machinery makers to report quarterly results.
Last month, rival Agco Corp reported market-beating quarterly results, raised its full-year outlook and said farm equipment demand is expected to strengthen this year. CNH Global beat estimates for the ninth straight quarter and raised its sales outlook.
Posted by Haylie Shipp