U.S. farm equipment maker Deere & Co reported a higher-than-expected quarterly profit and forecast equipment sales to rise for the first time in three years, partly driven by improving economic conditions in Brazil and Argentina.
Deere’s shares were up 3.5 per cent at $113.00 in premarket trading on Friday.
The company has struggled with declining sales in the past three years as bumper corn and soybeans harvests in the United States dragged down prices, leaving farmers with less cash to spend on equipment.
To cope with the slump, Deere cut jobs and lowered production of its trademark green tractors and harvesting combines.
The cost-cutting measures and improved pricing helped the company beat profit estimates for the first quarter ended Jan. 29.
“While Deere is managing its business much more profitably than in past cycles, its forecast for 2017 now calls for equipment sales to be up despite key farmer fundamentals still yet to improve,” Jefferies Analyst Stephen Volkmann wrote in a note.
Deere said it expects fiscal 2017 industry sales of tractors and combines in South America to increase 15-20 per cent, up from its previous forecast of a rise of about 15 per cent.
Latin America is Deere’s third-biggest market, accounting for about 9 per cent of its total equipment sales.
The company, however, said it continues to expect farm equipment sales in the United States and Canada, which together form its biggest market, to fall 5-10 per cent in fiscal 2017.
“Deere’s forecasts ... suggest stabilization but no sign yet of market improvements other than in South America,” Volkmann added.
The company forecast overall fiscal 2017 equipment sales to increase 4 per cent, compared with its previous estimate of a decline of 1 per cent.
Deere also raised it full-year forecast for net income attributable to the company to $1.5-billion from its previous estimate of $1.4-billion.
Net income attributable to Deere fell to $193.8-million, or 61 cents per share, in the first quarter ended Jan. 29, from $254.4-million, or 80 cents per share, a year earlier.
Total net sales fell about 1.5 per cent to $4.70-billion.
Analysts on average were expecting earnings of 55 cents per share on revenue $4.69-billion, according to Thomson Reuters I/B/E/S.Report Typo/Error