Deere & Co., the world’s largest farm-equipment maker, reported a 47 percent jump in fiscal third-quarter earnings, while tempering investor expectations for the fourth quarter amid weakening demand in Western Europe.
Net income climbed to $617 million, or $1.44 a share, in the third quarter ended July 31, amid strength in the U.S. farming industry, the Moline, Illinois-based company said in a statement today. The average of 17 analyst estimates compiled by Bloomberg was for profit excluding some items of $1.22.
Deere fell in New York trading after saying fourth-quarter earnings will be $375 million, less than the average estimate from analysts for $389.4 million, excluding items. Deere, led by Chief Executive Officer Sam Allen, said full-year sales will rise 5 percent to 10 percent in the U.S. and Canada on “solid” commodity prices, while Western Europe sales will fall as much as 20 percent.
“While the company’s guidance looks a tad light relative to expectations, this is a conservative management team and is probably trying to set a reasonable bar to exceed,” Joel Levington, managing director of corporate credit at New York- based Brookfield Investment Management Inc., said in an e-mail.
Third-quarter sales gained 18 percent to $6.22 billion, Deere said. Net income in the year-earlier period was $420 million, or 99 cents a share.
Investors may be expecting Deere to benefit too quickly from rising crop prices, said Stephen Volkmann, an analyst for Jefferies & Co. in New York who has a “buy” rating on the shares. Wheat futures in Chicago reached a 23-month high Aug. 6, as a drought in Russia increases demand for U.S. grain exports. Corn futures have also gained this month.
“It was a little too soon to see benefits from recent strength in crop prices,” Volkmann said in an interview today. “It takes a few quarters.”
Third-quarter revenue in Deere’s agriculture and turf division rose 12 percent to $5.2 billion, the company said. The unit’s operating profit jumped 72 percent to $824 million.
Construction and forestry sales increased 59 percent to $1.01 billion while operating profit reached $66 million, compared with a $28 million loss a year earlier.
Operating income is the total amount of money a company makes through its earning assets and services.