By JOSH FUNK
Farmers in the Western Hemisphere bought more Deere & Co. equipment in its second quarter, helping the company boost net income by 16 percent as the global economy slowly improved.
The maker of iconic green-and-yellow farm and construction equipment also raised its outlook for the second time this year. Deere officials said Wednesday that demand for combines and large tractors was stronger than expected â particularly in Brazil, Argentina, the U.S. and Canada â so the company is cautiously optimistic about the year.
The Moline, Ill.-based company said it generated $547.5 million in net income, or $1.28 per share, in the quarter ended April 30. That's up from net income of $472.3 million, or $1.11 per share, a year earlier. Excluding a charge related to health care legislation, profit was $1.58 per share.
Deere's revenue grew 6 percent to $7.13 billion, from $6.75 billion, in the same period last year. Part of that increase came from price increases and favorable currency exchange rates, but sales of large tractors and combines have improved and construction equipment sales are starting to rebound from historic lows as the economy recovers.
Deere officials said much of the increase in construction equipment sales came from dealers restocking inventory after last year's reductions.
The results topped analysts' expectations for net income of $1.09 per share on $6.6 billion revenue, according to Thompson Reuters. Analysts generally exclude one-time charges from their estimates.
Edward Jones analyst Jeff Windau said he was impressed with the way Deere was able to convert the sales increase into profits while hardly increasing costs.
"It's an exceptional quarter," Windau said.
The company now expects its sales to grow 11 percent to 13 percent and net income to reach $1.6 billion. Last fall, Deere officials predicted net income of $900 million for fiscal 2010. In February it raised the forecast to $1.3 billion.
Deere estimates that U.S. farmers will collectively generate net income of $81.5 billion in 2010, up from last year's $70.9 billion estimate. So that could help equipment purchases.
Deere predicts that agricultural equipment sales this year will soar 25 percent in South America because on strong demand in Brazil and Argentina. Sales in the U.S. and Canada are expected to grow 5 percent to 10 percent.
The company said the increases will offset weakness in western Europe where sales are expected to fall 10 percent to 15 percent in 2010.
Deere estimates its sales of construction equipment will grow by 30 percent worldwide in 2010. The increase is compared to recession levels of a year ago.
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.
Deere stock rose $2.09, or 3.7 percent, to $59.25 in afternoon trading.
A look at Deere & Co.'s outlook for 2010
HARVESTING PROFITS: Farm equipment maker Deere & Co. said Wednesday that its second-quarter net income jumped 16 percent to $547.5 million, or $1.28 per share, because sales of farm and construction equipment improved.
SEEDS OF RECOVERY: Deere said the global economy is improving and farmers are buying more tractors and combines, especially in Brazil, Argentina, the U.S. and Canada.
IMPROVED OUTLOOK: Deere expects sales to grow 11 percent to 13 percent this year and net income to reach $1.6 billion U.S. sales should be up 5 percent to 10 percent.
Deere & Co.: http://www.deere.com
Copyright 2010 The Associated Press.