Deere beats second-quarter profit estimate but maintains full-year forecast

The John Deere logo is seen at their equipment exhibit at the Farm Progress Show in Decatur, Ill. (Seth Perlman/AP Photo)

Farm equipment maker Deere beat second-quarter profit estimates on Thursday, helped by improved demand for its small agriculture and construction machinery, but kept its full-year profit forecast unchanged.

Its construction segment proved a bright spot for Deere as years of weak crop prices and rising costs have led farmers to delay purchases of new farm equipment.

Last month, Deere’s construction equipment rivals Caterpillar and CNH Industrial told investors that they had seen improved demand for their products, with dealers opting to add inventory.

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Deere’s Small Agriculture segment posted a 16 per cent rise in revenue while the Construction segment’s revenue jumped 29% for the three months through May 3. The two segments contributed 62 per cent to the company’s net sales, which grew 5.4 per cent to US$11.78 billion.

Moline, Illinois-based Deere also said it was helped by a US$272 million tariff refund.

The world’s largest farm equipment manufacturer, however, cited challenges in the agricultural market and kept its full-year net income target range of US$4.5 billion to US$5 billion unaltered.

Deere shares rose briefly after it announced the results but then fell three per cent in premarket trading.

“While encouraged by the upside to the construction segment, investors are still looking for signs of recovery in the agriculture segments, which remains a mixed bag globally,” Oppenheimer analyst Kristen Owen said.

Production & Precision Agriculture, the company’s largest segment, posted a 14 per cent revenue drop amid weak demand for heavy equipment such as combine harvesters.

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The company is under pressure to lower costs in the segment amid expectations of lower net farm income in the U.S. this year.

Deere posted quarterly net income of US$6.55 per share. Analysts on an average expected US$5.70 per share, according to data compiled by LSEG. Its quarterly net sales of US$11.78 billion came in ahead of analysts’ expectation of US$11.54 billion.

(Reporting by Nandan Mandayam in Bengaluru; Editing by Joyjeet Das)