Deere & Company Plows Higher on Record Third Quarter Earnings

Andrew Klips  |

Shares of Deere & Co. (DE) are rising in pre-market activity on Wednesday after the farm and construction equipment maker increased its profit outlook for the full year and posted third-quarter results that easily topped Wall Street expectations.

For the quarter ended July 31, the Moline, Illinois-based company reported a 4-percent climb in revenue to a Q3 record $10.01 billion from $9.59 billion in the year prior quarter.  Also making an all-time high for the third quarter, net income totaled $996.5 million, or $2.56 per share, compared to $788.0 million, or $1.98 per share, in last year’s quarter.

Analysts were forecasting profits of $2.18 per share on sales of $9.2 billion.

"John Deere is well on the road to another year of impressive performance after reporting record third-quarter results.  Deere's success is a reflection of considerable strength in the farm sector, especially in North and South America," said Samuel R. Allen, chairman and chief executive at Deere.

Higher shipment volumes and the impact of price realization helped drive operating profit to $1.34 billion for the quarter, compared to $1.01 billion in the third quarter of 2012.

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In the U.S. and Canada, equipment sales improved 4 percent year-over-year.  In the rest of the world, equipment sales increased 5 percent, including an unfavorable currency translation impact of 1 percent.

Net income from Deere’s equipment operations was $846 million, compared with $678 million in Q3 2012.  The financial services arm of the company posted net income of $150.0 million, up substantially from $110.4 million last year.

As far as total revenue, an 8-percent increase in sales in the company’s agriculture and turf business to $7.85 billion was modestly offset by an 11 percent decrease in construction and forestry sales, a much smaller contributor to overall revenue.

As far as the current quarter, the company is facing a tough comparable to equipment sales in the fourth quarter of last year, when Deere factories were running full steam to catch up to customer orders.  Deere expects to see a 5 percent decrease in equipment sales in the fourth quarter compared to the robust numbers last year.  For the full fiscal year 2013, which ends October 31, the company raised its guidance to a net profit of $3.45 billion with equipment sales gaining 5 percent.  In May, the company projected net profit of $3.3 billion for the year (and the same 5-percent improvement in sales).

Shares of DE have limped through 2013, losing about 1.5 percent through Tuesday’s closing price of $83.91.  Shares have advanced about 1 percent in pre-market activity today to bring shares close to even for the year with the earnings beat and improved outlook.

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