Deere posts increased quarterly profit
CHICAGO: Deere & Co reported a rise in quarterly earnings, defying Wall Street estimates, as higher crop prices, government subsidy payments and replacement demand lited sales of farm machines.
The maker of John Deere and the world’s largest farm equipment producer forecast net income of $3.6 billion-$4.0 billion for fiscal 2021 as it expects to benefit from improving conditions in the farm economy and stabilization in the construction and forestry markets.
The forecast is higher than a $3.3 billion estimate from analysts surveyed by Refinitiv and the $2.75 billion reported for 2020.
“Higher crop prices and improved fundamentals are leading to renewed optimism in the agricultural sector and improving demand for farm equipment,” said Chief Executive John May.
Deere’s shares have gained 31% since its last earnings report in late August, buoyed by a turnaround in the farm economy. However, they were down 1.2% at $258.39 in mid-day trade Wednesday, in line with a retreat in the broader market.
The company said its early order programs for planter, sprayer and combines in the US have posted double-digit growth. Orders for large tractors are also up.
With a pick-up in retail sales, inventory for both new and used machines has fallen to multi-year lows, Deere told investors on an earnings call.
Overall, industry sales of agricultural equipment in the U.S. and Canada - Deere’s biggest combined market - are forecast to grow by 5% to 10% next year. Sales are also projected to increase in Europe and South America.
But Chief Financial Officer Ryan Campbell warned that supply constraints as well as labor force availability due to COVID-19 posed risks to Deere’s 2021 earnings forecast.