Deere 3Q Profit Jumps, Helped By Strong Demand

CHICAGO (Dow Jones)--Deere & Co.'s (DE) fiscal third-quarter profit surged 47%, on strengthening demand for large farm machinery in the U.S. and rebounding sales of its construction equipment.
 
Deere's results easily topped Wall Street's expectations for the quarter, and it now expects equipment overall sales to be up about 32% in the fourth quarter from a year-earlier levels with earnings coming in at about $375 million.
 
But Deere expects demand in Europe to continue to deteriorate, as weak livestock and dairy markets and bulging inventories of used equipment hold down new equipment sales.
 
Deere shares fell 1.6% to $66.14 a share in premarket trading, as the quarter's equipment sales in the quarter rose less than the company had forecast in May and its fourth-quarter profit outlook came in below analysts' estimate.
 
Deere, the world's largest manufacturer of farm machinery, benefited from its market-leading position in the U.S., where solid commodity prices, healthy cash receipts from farming and low interest rates have boosted sales large, high-horsepower machinery.
 
Third-quarter sales of agriculture and landscaping equipment rose 12% from a year ago. Meanwhile, construction and forestry equipment sales rose 59% from the severely depressed levels a year ago. Higher production volumes, price increases and Deere's ability to control its costs resulted in an 88% increase in operating profit from farm and construction machinery.
 
"While we have benefited from positive conditions in the U.S. farm sector, particularly in terms of demand for large equipment, European markets are down sharply," Chairman and Chief Executive Samuel Allen said in a statement. "Demand for construction and forestry equipment is improved from last year but still remains far below normal levels."

The company expects industry-wide sales of farm equipment in Western Europe to fall 15% to 20% this year from 2009, compared with the company's May forecast of a 10% to 15% decline.
 
But Deere raised its industry-wide sales outlook for South America, where farm equipment demand has been aided by strengthening crop prices, improved weather conditions and a continuation of government-sponsored financing for machinery purchases in Brazil. The company sees South American farm machinery sales rising as much as 30% this year from 2009, compared with about a 25% increase forecast earlier.
 
For the quarter ended July 31, Deere reported a profit of $617 million, or $1.44 a share, up from $420 million, or 99 cents a share, a year earlier. Overall revenue rose 16% to $6.84 billion. Farm and construction sales combined rose 18%, compared with a 21% to 23% increase forecast earlier by the company.
Analysts polled by Thomson Reuters expected earnings of $1.24 on $6.52 billion in revenue.
 
Deere said it expects fiscal fourth-quarter earnings of about $375 million. Analysts expected profit of $385 million. The company sees sales for the year rising 12%, near the midpoint of the 11% to 13% increase predicted earlier.
 
By Bob Tita
Of DOW JONES NEWSWIRES