© Reuters. Deere & Co. 8R autonomous tractor is pictured at Jensen Test Farm in Bondurant, Iowa, U.S., April 28, 2022. Picture taken April 28, 2022. REUTERS/Bianca Flowers
By Bianca Flowers and Aishwarya Nair
CHICAGO (Reuters) -Deere & Co on Wednesday reported a higher-than-expected quarterly profit on strong sales accelerated by price hikes for its agriculture and construction equipment, and forecast higher net income next year.
Shares of the world’s largest farm equipment company were up 3% in premarket trading.
The Moline, Illinois-based company’s net income rose 75% to $2.25 billion, or $7.44 per share, topping a consensus forecast of $7.11 per share for the quarter ending in October.
Higher grain and soybean prices aided the machinery giant’s margins as farmers purchased new equipment or bought parts to upgrade their fleet.
“They had broad-based strength across all their divisions,” said Matt Arnold, an equity analyst at Edward Jones. “The demand environment is really healthy, and (Deere (NYSE:)) is translating that into a big upturn in earnings.”
With order books full for farm equipment heading into next year, Deere reassured shareholders that supply chain logjams were starting to abate and gave an optimistic outlook for 2023. The company is also eyeing an uptick in construction sales from infrastructure spending.
“Deere is looking forward to another strong year in 2023 based on positive farm fundamentals and fleet dynamics as well as an increased investment in infrastructure,” Chief Executive John May said in a statement.
The industrial bellwether expects net income between $8.0 billion and $8.5 billion for fiscal year 2023, along with higher sales. The company has outperformed the broader market, with shares trading up roughly 20% year to date.
Deere’s earnings beat mirrored rival Caterpillar Inc (NYSE:)’s third-quarter results. Caterpillar also benefited from price increases for its products to help offset rising raw material and production costs.
Operating profit for Deere’s construction and forestry equipment grew 53% from a year earlier, while precision agriculture products saw the biggest increase, rising 124%.
Total net sales and revenue jumped 37% to $15.54 billion. Equipment net sales rose to $14.35 billion, topping estimates of $13.39 billion, according to Refinitiv.
