Shares in Deere & Co looked jumped to a record high after the agricultural equipment giant unveiled a stronger-than-expected finish to its financial year, and forecast “healthy demand” for its machinery ahead.
The maker of John Deere farm and construction machinery revealed earnings up 75% at $2.25bn for the three months to October 30, the fourth quarter of its financial year, equivalent to $7.44 per share.
The result exceeded the $7.11-per-share result that investors had expected, according to Refinitiv.
For the year to October 2023, the forecast its earnings growing to $8.0bn-8.5bn, from the $7.13bn reported for the latest financial year.
Deere shares rose 7.5% to $447.90 in morning trading in New York.
“Deere is looking forward to another strong year in 2023,” said John May, the group’s chairman and chief executive, citing boosts from “positive farm fundamentals and fleet dynamics,” and well from increased investment in infrastructure which would support its construction machinery division.
“There factors are expected to support healthy demand for our equipment.”
The group forecast particularly strong sales growth, of 15-20%, in its production and precision ag division, which makes machinery used by the likes of large arable farmers.
Deere reported for October, on a rolling three-month basis, double digit growth in its combine and tractor sales in Europe, with combine sales in Canada and the US above the industry average of 41%.
Sales of large tractors in Canada and the US were reported growing by a “single digit” rate, above the industry average of 1% expansion.
Market share gains?
For the small ag and turf division, which aims more at markets such as livestock farmers and greenkeepers, sales were forecast expanding by up to 5% in the new financial year.
Sales of construction and forestry machines were seen growing by about 10%.
The estimates assume growth in Deere’s construction equipment sales well ahead of that of a world market expected to be largely flat over the next year.
Among farm sectors, the Canada and US large ag segment was viewed as a standout performer, with industry sales forecast growing by 5-10%.
Europe’s and South America’s ag machinery markets were seen expanding by at best 5%.
For the fourth quarter, Deere reported a 120% surge to $1.74bn in operating profits at its production and precision ag division, reflecting extra contributions of approaching $900m from both the volume mix and increased pricing, far outpacing an increase of $586m in production cost.
Revenues at the division soared by 59% to $7.43bn.
For small ag, price rises were the main contributor to a 46% surge to $506m in operating profits, on revenues up 26% at $3.54bn.
Price increases also drove a 53% gain to $414m in construction machinery profits, on revenues up 20% at $3.73bn.