Deere raises forecast as profit more than doubles on equipment demand
Farm machinery companies are benefiting from a turnaround in the U.S. farm economy following a run-up in grain prices
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Deere & Co on Friday raised its full-year earnings forecast after a 169% surge in quarterly profit, as a recovering global economy boosts demand for farm machine and construction equipment.
The world's largest farm equipment manufacturer, however, expects supply-chain pressures to intensify in the remainder of the year.
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The Illinois-based company is not alone. Rising demand coupled with COVID-19 disruptions has caused capacity constraints all along the supply chain, leaving manufacturers short of the steel, plastics, microchips and tires they need for their products.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| DE | DEERE & CO. | 398.90 | +4.22 | +1.07% |
Chief Executive Officer John May said Deere is working closely with key suppliers to secure the parts and components.
The company said net income for 2021 would be between $5.3 billion and $5.7 billion, up from a previous forecast of $4.6 billion to $5.0 billion.
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Deere's shares, which have outperformed the S&P 500 with a gain of about 32% this year, were up $1.9% at $362 in pre-market trade.
Farm machinery companies are benefiting from a turnaround in the U.S. farm economy following a run-up in grain prices. A record surge in U.S. corn and soybean prices has boosted farmers' incomes, lifting demand for tractors and combines.
That is a sharp contrast from previous years when American farmers were grappling with a series of challenges: an oversupply of grain, former President Donald Trump's trade war with China and then the pandemic.
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Deere expects industry sales of large agricultural equipment in the United States and Canada - the company's biggest combined market - to grow by 25% this year compared with growth of 15% to 20% estimated in February.
Earnings for the second quarter came in at $5.68 per share, higher than $2.11 per share a year ago. Equipment sales rose 34% year-on-year to about $11 billion.
(Reporting by Rajesh Kumar Singh in Chicago and Shreyasee Raj in Bengaluru;Editing by Vinay Dwivedi and Chizu Nomiyama)