Deere & Co.'s third-quarter net income jumped 15 per cent and it boosted its outlook for the year Wednesday with global demand for its green and yellow equipment still strong.
Deere benefited from favourable exchange rates and price increases, but most of the improvement was driven by strong sales growth. Equipment sales grew 49 per cent outside of the U.S. and Canada. Sales rose 10 per cent within the United States and Canada.
Deere generated $712.3 million, or $1.69 per share, in the quarter that ended July 31. That's up from $617 million, or $1.44 per share, in the same period last year.
Strong equipment sales helped the Moline, Ill., company's revenue grow 22 per cent to $8.4 billion in the quarter, up from last year's $6.84 billion.
Deere said its costs increased 23 per cent to $7.29 billion in the quarter from last year's $5.92 billion.
Analysts surveyed by FactSet expected earnings per share of $1.67 on $7.52 billion revenue on average.
Even with the beat, shares sank nearly 2 per cent in early trading with some investors expecting better when the gravity of the Japanese tsunami effect are removed.
Credit Suisse analyst Jamie Cook said the Japanese tsunami proved to be a much smaller drag on earnings than expected. Earlier this year, Deere had predicted the Japanese disaster would hurt sales by $300 million, but Wednesday the company said the actual impact was about $70 million.
However, Cook said that the reduced impact from the tsunami bumped up Deere's third-quarter earnings by about 9 cents per share. Without that and without that, Deere would have fallen short of Wall Street expectations.
Deere says its 2011 equipment sales should grow 25 per cent over 2010 to $29.47 billion. That's up from a previous forecast for 20 per cent growth. Analysts were expecting 2011 sales of $29.05 billion, according to a poll by FactSet.
The company also lifted its expectations on net income slightly, from $2.65 billion, to $2.7 billion.
Deere's Chairman and CEO Samuel Allen said the company is benefiting from global trends in food and demand for shelter and infrastructure.
"We remain confident that these positive macroeconomic trends have staying power and should prove rewarding to the company and its stakeholders in the years ahead," Allen said.
But Allen also noted that the recent turmoil in financial markets and concerns about the health of the global economy have added some uncertainty to Deere's short-term outlook.
Deere's results offer an indication of how well farmers worldwide are doing. In addition to agricultural equipment, Deere makes construction and forestry equipment, such as backhoes, excavators, riding mowers and leaf blowers. But construction and forestry sales represent a small portion of Deere's business compared to its agricultural equipment.
Deere's shares declined $1.43 to $73.73 in early trading Wednesday.