Deere & Co, the world’s largest farm equipment maker, lifted its full-year earnings forecast on Friday after a smaller-than-expected decline in quarterly profit, as the sector benefits from replacement demand and government stimulus.
|DE||DEERE & CO.||352.42||+3.17||+0.91%|
The Moline, Illinois-based company said it now expects net income of about $2.25 billion for the full year, higher than $1.6 billion to $2 billion estimated earlier.
Profit for the latest quarter came in at $2.57 per share -- an 8.5% year-on-year decline compared with a 55% drop expected by analysts in a Refinitiv survey. Similarly, equipment sales fell 12.4% year-on-year to $7.9 billion, lower than Wall Street’s estimate of a 25.3% decrease.
Deere’s shares, which have gained 36% since its last earnings report, were up 4.5% in pre-market trading.
“Although unsettled market conditions and related customer uncertainty are expected to have a moderating effect on key markets in the near term, we believe Deere is well-positioned to help make our customers more profitable and sustainable,” Chief Executive John May said in a statement.
The company pared its forecast for sales declines at its farm- and construction-equipment divisions.
Sales of tractors and combines for the year are expected to be down 10%, compared with a 10% to 15% drop estimated in May, helped by improved demand in North America and Asia. Construction and forestry machine sales are estimated to decline an annual 25%, lower than a 30% to 40% fall forecast earlier.
The coronavirus pandemic has lowered commodity prices, squeezing farmers who are still reeling from the U.S.-China trade dispute. However, farmer sentiment has rebounded on the back of improved planting conditions as well as additional government subsidy payments.
President Donald Trump has announced a $19 billion relief program to help U.S. farmers cope with the impact of the health crisis. Also aiding agricultural equipment demand is a growing need for farmers to replace their aging tractors and combines.