3rd UPDATE: Deere 1Q Profit More Than Doubles; Year View Raised
16 Febbraio 2011 - 8:49PM
Dow Jones News
Deere & Co.'s (DE) fiscal first-quarter profit more than
doubled as robust sales of farm and construction machinery helped
offset rising material expenses that have weighed on profits for
other manufacturers.
Deere, the world's largest maker of farm equipment by sales,
beat analysts' expectations for the quarter and raised its sales
and profit forecasts for the fiscal year ending Oct. 31.
"All in all, it was a strong start to what is expected to be a
very strong year," said Susan Karlix, investor relations director,
during a conference call Wednesday with analysts. "Positive, global
farm conditions were certainly a factor, but John Deere is
achieving record results in the face of conditions that remain
lackluster in some sectors."
First-quarter sales of farm machinery rose 21% from a year ago.
The company reported a 35% increase in sales in the U.S. and
Canada, propelled by higher prices for farm commodities that have
given farmers more money to spend on tractors and harvesting
combines. U.S. farmers also ratcheted up their purchases late last
year in advance of higher prices for 2011 models to comply with
stricter U.S. standards on engine exhaust.
The Moline, Ill., company now sees its world-wide sales of farm
machinery rising about 16% this year, up from a 7% to 9% increase
forecast in November.
Sales of Deere's construction and forestry equipment rose 81%
from a year earlier, mirroring the rebounding demand experienced by
rival Caterpillar Inc. (CAT). The company now expects its
construction and forestry sales to increase 35% this year over
2010, compared with a 25% to 30% increase anticipated earlier.
Like other manufacturers, Deere reported headwinds from rising
costs for materials and components such as steel, copper and tires.
But higher order volumes for equipment and improved utilization of
Deere's factories drove down other production-related expenses,
offsetting some of the higher material costs. Deere also raised its
machinery prices and reported better sales of higher-margin models,
further blunting the impact of rising material costs in the
quarter.
Deere's operating margin on farm equipment was 12.7% in the
quarter, compared with 9.8% a year ago and 12.2% in the fourth
quarter. Meanwhile, the operating margin on construction equipment
was 7.7% in the quarter, as Deere swung from a year-ago loss.
Construction's margin was 4.7% in the fourth quarter.
"They're seeing higher prices just like everybody else," said
Adam Fleck, an analyst for research firm Morningstar Inc. "But at
the end of the day, higher prices and higher factory production
levels are going to mask a lot of those issues at the bottom
line."
For the year, Deere raised its profit forecast to $2.5 billion
on equipment-sales growth of 18% to 20%. In November, it forecast
profit of about $2.1 billion and equipment-sales growth of 10% to
12%.
Deere offered industry forecasts for farm machinery sales that
were noticeably more bullish than predictions offered a week ago by
rival Agco Corp.(AGCO). Deere now expects industrywide sales to
rise about 5% in the U.S. and Canada, up from a flat forecast in
November, and it sees sales climbing 10% in Europe, up from a 5% to
10% increase previously. The company expects industry sales to be
flat in South America, as the Brazilian government scales back some
of the financing assistance for farmers that expanded sales of
tractors in recent years.
Deere is looking to put pressure on Agco's market-leading share
in South America with a new lineup of machinery for the region.
During the quarter ended Jan. 31, Deere reported a profit of
$513.7 million, or $1.20 a share, up from $243.2 million, or 57
cents a share, a year earlier. Revenue increased 27% to $6.12
billion.
Analysts polled by Thomson Reuters expected earnings of 99 cents
on revenue of $5.67 billion.
Recently, Deere's stock set a new 52-week high at $97.36 and was
up $2, or 2.2%, at $95.63.
-By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com
--Tess Stynes contributed to this article.
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