AGCO AGCO Corp

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.

Grafico Azioni AGCO (NYSE:AGCO)
Storico
Da Giu 2024 a Lug 2024

Grafico Azioni AGCO (NYSE:AGCO)
Storico
Da Lug 2023 a Lug 2024