Deere & Co. (DE) -), the industrial-equipment stalwart, posted better-than-expected fiscal-third-quarter earnings and lifted its full-year profit forecast thanks to robust global demand and easing supply chains.
Earnings for the three months ended in July came in at $10.20 a share, up 65% from the year-earlier period and ahead of the Wall Street consensus forecast of $8.20 a share.
Group worldwide sales rose 21.6% from a year earlier to $15.81 billion, topping analysts' forecasts of a $14.52 billion tally.
Looking into the end of the 2023 fiscal year Deere estimates net income of between $9.75 billion and $10 billion, up from its prior forecast of $9.25 billion and $9.5 billion.
"Reflected by our strong third-quarter results, Deere continues to benefit from favorable market conditions and an operating environment showing further improvement," Chief Executive John May said. "We are also being helped by stabilizing conditions in the supply chain, the sound execution of our business plans, and an improving ability to meet demand for our products and serve customers."
Deere shares were marked 5.2% lower in early afternoon trading Friday to change hands at $397.41, extending the stock's year-to-date decline to around 6.3%.
D.A. Davidson Analyst Assesses Deere Report
D.A. Davidson analyst Michael Shlisky, who carries a buy rating with a $510 price target on Deere stock, suggests the day's market reaction could be tied to details in its outlook.
"It's difficult to quibble with strong numbers like these, although some could question the outsized role of taxes in the guidance increase and the sustainability of pricing trends," he said.
"Pricing made up much of the operating-profit increase year-on-year (volumes were relatively flat in all three Equipment segments)," he added. "While we note it as a positive above, investors may want more information about whether pricing can remain favorable in FY:24, and if manufacturing costs can be held in check as well."
Earlier this spring, Deere noted that low dealer inventory levels would likely prompt a ramp-up in production, and boosted its full-year profit forecast for net income of between $9.25 billion and $9.5 billion.
Improved agricultural demand, at the same time, has helped Deere boost prices by as much as 20%, according to some estimates, enabling it to improve both overall sales and profit margins.
Earlier this month, Deer's larger rival, Caterpillar (CAT) -), posted better-than-expected second-quarter earnings thanks in part to higher construction equipment demand linked to a surge in infrastructure spending.
Construction sales were up 19% to $7.15 billion, Caterpillar said, "driven by the impact from changes in dealer inventories and higher sales of equipment to end users."
The gains were also linked in part to a boost in demand for construction equipment linked to President Joe Biden's $1 trillion "once in a generation" infrastructure bill passed in late 2021.
- Get investment guidance from trusted portfolio managers without the management fees. Sign up for Action Alerts PLUS now.
