Farm and construction machinery maker Deere & Co. (DE) reported Wednesday a higher profit for its third quarter, boosted by strong demand for farm equipment in the U.S., despite international weakness. Meanwhile, quarterly earnings per share and top line fell short of analysts' estimates.
Looking ahead to fiscal 2012, the company trimmed its profit forecast as it sees slower growth in equipment sales. In pre-market activity, Deere shares lost 5.3 percent.
Chairman and Chief Executive Officer Samuel Allen said, "Although a strong quarter, we are not satisfied that sales fell short of our expectations due to weakening in certain international markets and short-term manufacturing inefficiencies resulting from the introduction of a record number of new products."
For the third quarter, net income attributable to the company grew 11 percent to $788 million or $1.98 per share from last year's $712.3 million or $1.69 per share. On average, 18 analysts polled by Thomson Reuters expected earnings of $2.31 per share for the quarter. Analysts' estimates typically exclude one-time items.
The company's financial services subsidiary, John Deere Capital Corp., generated attributable net income declined from last year primarily due to higher selling, administrative and general expenses, partially offset by growth in the credit portfolio.
Deere's worldwide net sales and revenues climbed 15 percent to $9.59 billion. Net sales of the equipment operations grew 16 percent to $8.93 billion, but missed analysts' consensus estimate of $9.53 billion for the quarter.
According to the company, net sales included price realization of 5 percent and an unfavorable currency-translation effect of 5 percent. Equipment net sales in the United States and Canada increased 28 percent, while sales outside the U.S. and Canada were essentially unchanged mainly with unfavorable currency-translation effects.
In the quarter, demand remains strong for U.S. farm equipment while construction continues solid recovery. Agriculture & Turf sales increased 14 percent, largely due to higher shipment volumes and price realization, partially offset by the unfavorable effects of currency translation. Construction & Forestry's sales climbed 23 percent, mainly due to higher shipment volumes and price realization.
Looking ahead to fiscal 2012, Deere now expects attributable net income to be about $3.1 billion, compared to previous forecast of around $3.35 billion.
Deere now projects equipment sales to increase by about 13 percent for both fiscal 2012 and the fourth quarter, including an unfavorable currency-translation impact. Previously, equipment sales were projected to increase by nearly 15 percent.
Back in May, Deere had lifted its full-year earnings forecast for a second time after reporting better-than-expected earnings and revenues for the second quarter, helped by a strong farm economy. It was its eighth consecutive quarterly earnings record in the quarter.
Allen said, "Global economic conditions and dryness in several key markets warrant some caution in coming months. However, this year's drought could positively influence our outlook as it spotlights the need for John Deere's highly productive agricultural equipment."
In pre-market activity, Deere shares lost $4.40 or 5.5 percent, and are currently trading at $75.73.
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