Deere says 2Q profit soared 65 pct

MOLINE, Ill. — Deere & Co. said Wednesday its fiscal second-quarter profit soared 65 per cent because of strong demand for its agricultural equipment, especially in the United States, Canada and Brazil.

MOLINE, Ill. — Deere & Co. said Wednesday its fiscal second-quarter profit soared 65 per cent because of strong demand for its agricultural equipment, especially in the United States, Canada and Brazil.

The earnings beat Wall Street expectations, and it raised its forecast for 2011 revenue.

But its shares fell $1.63, or 1.9 per cent, to $85.33 in midday trading because Deere predicted higher-than-expected costs and warned about weakness in key South American markets.

“We’ve noticed this with other industrials: there are high expectations right now in the market,” said Jeff Windau, an Edward Jones analyst.

Jefferies & Co. analyst Stephen Volkmann said in a research note that he was somewhat disappointed with Deere’s pretax profit margin, and he said a lower tax rate boosted Deere’s earnings by 6 cents per share in the quarter.

“Overall the quarter was good, but not great,” Volkmann said.

Deere is the world’s largest maker of agricultural equipment. It also makes construction, forestry and landscaping equipment, such as backhoes, excavators, riding mowers and leaf blowers.

The Moline, Ill., company said its net income rose to $904.3 million, or $2.12 per share, during the quarter ended April 30. That’s up from last year’s $547.5 million, or $1.28 a share, weighed down by a $129.5 million charge related to U.S. health care reform.

Analysts surveyed by FactSet expected earnings of $2.06 a share.

Revenue grew 25 per cent to $8.9 billion from last year’s $7.1 billion. Analysts expected $8.12 billion.

Windau said investors appear to be concerned about the costs Deere reported for raw materials, compensation and research and development because those were higher than expected.

Deere said raw-material costs were up about $175 million in the second quarter. Research and development costs were up 12 per cent and administrative costs were 19 per cent higher than the previous year.

The company raised its forecast for fiscal 2011 revenue. Deere now predicts sales will be rise 21 to 23 per cent even though the Japanese tsunami will hurt sales by $300 million. Earlier this year, Deere predicted sales would increase 18 to 20 per cent.

“John Deere is well positioned to address the world’s growing need for agricultural commodities, shelter and infrastructure,” said Samuel Allen, Deere’s chairman and chief executive.

Deere now predicts full year net income will grow to $2.65 billion in 2011. Its previous forecast was for $2.5 billion net income.

Company officials predict that global sales of agricultural and turf equipment will increase 20 per cent in 2011 with continued healthy sales growth in North America and Asia. But sales in South America are expected to decline 5 to 10 per cent from last year’s high levels.

To help deal with higher demand, Deere said it plans to invest $80 million in a new agricultural equipment manufacturing plant in northeast China to serve the region. It would be Deere’s seventh manufacturing plant in China including two that are joint ventures.

And Deere said the Kuhn Group will begin producing large John Deere branded square balers for European markets starting in 2012.

Deere said its third quarter sales should be up about 20 per cent over last year.

The company said farmers in most of the world’s major markets are seeing their income grow because demand for their crops remains high while global stockpiles are relatively low. Deere predicted that this year’s crop prices will average well above last year’s levels.

Corn prices have more than doubled since last summer and hit an all-time high of $7.76 a bushel on April 11. The price had risen because demand from ethanol producers and overseas consumers has grown faster than supply. Prices have declined this month because new USDA estimates predicted corn supplies will grow this year, but corn prices still remain close to $7 per bushel.

——

Online:

Deere & Co.: http://www.deere.com

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Red Deer Rebels forward Arshdeep Bains eyes a loose puck in front of the Medicine Hat Tigers net Saturday night in WHL action at the Centrium. (Photo by ROB WALLATOR/Red Deer Rebels)
Rebels fall short in 12th straight loss

Tigers 5 Rebels 2 (Saturday) Tigers 3 Rebels 2 (Monday) The Red… Continue reading

Red Deer property owners will receive their 2019 property assessment notices in the next few days.  (File photo by Advocate staff)
Red Deer awaiting more details on how federal budget impacts city

The City of Red Deer is awaiting more information on how much… Continue reading

With a ban on sit-in dining once again in place, Las Palmeras owner Andre Lemus is gearing up for more takeout and delivery business. He has also applied to set up an outdoor patio, where dining is allowed under new restrictions. Photo by PAUL COWLEY/Advocate staff
Big interest in outdoor patios in Red Deer as sit-down dining banned again

City of Red Deer has tweaked its patio regulations to make it easier to get a permit

A vial of the Medicago vaccine sits on a surface. CARe Clinic, located in Red Deer, has been selected to participate in the third phase of vaccine study. (Photo courtesy www.medicago.com)
Red Deer clinical research centre participating in plant-based COVID-19 vaccine trial

A Red Deer research centre has been selected to participate in the… Continue reading

Ottawa Senators' Connor Brown, right, scores on Calgary Flames goalie Jacob Markstrom during second-period NHL hockey action in Calgary, Alta., Monday, April 19, 2021. THE CANADIAN PRESS/Jeff McIntosh
Connor Brown scores twice for Ottawa Senators in 4-2 win over Calgary Flames

Connor Brown scores twice for Ottawa Senators in 4-2 win over Calgary Flames

Canada head coach Bev Priestman reacts during the women's international friendly soccer match between England and Canada at Bet365 stadium in Stoke on Trent, England, Tuesday, April 13, 2021. Priestman says her goal is to help Canada move up the Olympic podium after back-to-back bronze medals at the 2012 and 2016 Games. THE CANADIAN PRESS/AP/Rui Vieira
Olympic soccer draw will allow Canadians to start planning on and off the pitch

Olympic soccer draw will allow Canadians to start planning on and off the pitch

Federal government’s extension of CEWS in budget is some good news for CFL franchises

Federal government’s extension of CEWS in budget is some good news for CFL franchises

Canada's Brendan Bottcher dropped a 6-3 decision to Scotland's Bruce Mouat in the men's final of the Humpty's Champions Cup. Bottcher makes a shot against Scotland at the Men's World Curling Championships in Calgary, Alta., Friday, April 9, 2021.THE CANADIAN PRESS/Jeff McIntosh
Mixed results for Canadian teams at Champions Cup as Homan wins, Bottcher loses

Mixed results for Canadian teams at Champions Cup as Homan wins, Bottcher loses

University of Victoria rowing coach Barney Williams is photographed in the stands during the Greater Victoria Invitational at CARSA Performance Gym at the University of Victoria in Victoria, B.C., on Friday, November 29, 2019. The University of Victoria says Williams has resigned effective immediately. THE CANADIAN PRESS/Chad Hipolito
University of Victoria women’s rowing coach resigns by mutual agreement

University of Victoria women’s rowing coach resigns by mutual agreement

Stewart Cink watches his drive down the second fairway during the final round of the RBC Heritage golf tournament in Hilton Head Island, S.C., Sunday, April 18, 2021. (AP Photo/Stephen B. Morton)
Cink coasts to win at Hilton Head for 2nd title of season

Cink coasts to win at Hilton Head for 2nd title of season

The Official UEFA Champions League match balls are on display ahead of the Champions League quarter final second leg soccer match between Liverpool and Real Madrid at Anfield stadium in Liverpool, England, Wednesday, April 14, 2021. (AP Photo/Jon Super)
Threats of expulsion as UEFA confronts Super League rebel 12

Threats of expulsion as UEFA confronts Super League rebel 12

San Jose Sharks center Patrick Marleau (12) motions to the crowd during a break to mark his passing Gordie Howe for most NHL games played in the first period of an NHL hockey game Monday, April 19, 2021, in Las Vegas. (AP Photo/John Locher)
Sharks’ Marleau breaks Howe’s NHL games played record

Sharks’ Marleau breaks Howe’s NHL games played record

Most Read