Deere 1Q net income surges 19 percent on lower costs, easily beating Wall Street expectations
Deere & Co. boosted its outlook for 2010 Wednesday after reporting a 19 percent jump in first-quarter profit, and the heavy equipment maker’s shares spiked before the market opened.
Revenues tumbled 6 percent, yet the company said lower costs and better currency rates helped offset the “stubbornly weak” economy.
The maker of iconic green and yellow machinery said it earned $243.2 million, or 57 cents per share, during the quarter that ended Jan. 31. That’s up 19 percent from $203.9 million, or 48 cents per share a year ago.
Analysts surveyed by Thomson Reuters expected profits of 19 cents on average, but Deere beat even the highest profit prediction of 38 cents per share.
Deere shares gained 6.7 percent to sell for $57.40 in premarket trading Wednesday.
Deere, based in Moline, Ill., said its revenue fell to $4.8 billion from $5.1 billion a year ago, yet it still beat Wall Street expectations of $4.19 billion.
Partially offsetting the 6 percent revenue decline were costs for Deere, which declined 8 percent to $4.5 billion. And its lending unit generated $85.1 million net income in the quarter, nearly double the $46.8 million net income Deere generated from financial services a year ago.
Deere, the world’s largest manufacturer of agricultural equipment, also makes construction and forestry equipment, such as backhoes, excavators, riding mowers and leaf blowers.
President and CEO Samuel Allen said Deere should be ready to respond well to a global economic recovery because of its focus on controlling costs.
“Results for the quarter reflected solid execution of our operating and marketing plans throughout the company and are especially gratifying in light of global economic conditions that remain stubbornly weak,” Allen said.
Deere boosted its annual outlook above what it predicted in November. The company expects now sales to grow 6 percent to 8 percent with $1.3 billion in profit. Last fall, Deere officials predicted a $900 million profit in fiscal 2010.
Deere predicts that sales will increase 4 percent to 6 percent in its main agriculture and turf division. Sales in Deere’s smaller construction and forestry unit are expected to increase by about 21 percent as dealers restock inventory and the global economy begins to recover.