By Bob Tita
Deere & Co. raised expectations for profits next year, anticipating that higher crop prices will lead to improving demand from U.S. farmers for its tractors and harvesting combines.
Dry weather in the U.S. this summer contributed to a less robust harvest than anticipated, as demand for wheat, soybeans and corn rose due to higher consumption of dinners and baked goods at home during the coronavirus pandemic. That helped to shrink grain stockpiles and pushed up crop prices, which have also benefited this year from rising exports.
For Deere, the result is a better outlook for demand from farmers for its green-and-yellow machinery. The company on Wednesday predicted world-wide sales of its farm and landscaping equipment will rise by 10% to 15% next year.
"We are seeing demand pick up," said Joshua Jepsen, director of investor relations, during a conference call. "We're seeing that in our early order programs and the large tractor order book."
Deere said it expects net income next year in a range of $3.6 billion to $4 billion. It earned $2.75 billion in fiscal 2020, which ended Nov. 1. Analysts were expecting the company to forecast income of $3.36 billion for 2021.
Shares fell slightly to $259.05. The stock is up 54% this year, compared with 14% increase in the S&P 500 index.
The Moline, Ill.-based maker of tractors reported a 5% increase in profit for its latest quarter, despite a 1% decline in equipment sales compared with the same period last year. The company reported net income of $757 million for the quarter, or $2.39 a share, compared with $722 million, $2.27 a share, during the same period last year.
Net equipment sales, including Deere's construction and forestry machinery, were $8.65 billion. Analysts were expecting earnings of $1.49 a share and $7.56 billion of equipment sales, according to FactSet.
Write to Bob Tita at email@example.com
(END) Dow Jones Newswires