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(Reuters) – Deere (NYSE:DE) & Co raised its annual profit forecast on Friday after beating Wall Street estimates on higher revenue for its high-horsepower tractors and an increase in spending from construction customers.
Shares of the world’s largest farm equipment maker were up 5.8% in morning trading.
The industrial bellwether, a barometer for the global economy, has maintained strong profit margins despite recession concerns. Demand from farmers has been strong, after higher commodity prices last year aided producers to purchase new equipment or upgrade their fleets.
Deere’s margins have remained high as it has been able to raise prices across its equipment divisions, offsetting rising shipping costs and tight supply chains.
The company expects net income of $8.75 billion to $9.25 billion for the year, higher than the $8 billion to $8.5 billion estimated last quarter.
Analysts believe the revised outlook was due to “a combination of stronger pricing and producing machines on the manufacturing line as efficiently as possible,” said Matt Arnold, equity analyst at Edward Jones.
The Moline, Illinois-based company’s equipment sales rose 34%, while its production and precision agriculture division saw the most growth, with quarterly sales increasing 55% from the year prior, as the company expands its product portfolio in autonomous solutions for crop planting and harvesting.
Strong pricing for Deere’s herbicide applicator products, like See & Spray, helped operating profit in the production and precision agriculture division rise 308% from last year. The company noted that prices for the segment will increase 14% as demand remains solid.
Net sales for the machinery-maker’s construction and forestry segment rose 26% year-over-year.
The company’s financial services business has been resilient, however, income for the segment in the latest quarter fell to $185 million from $231 million previously.
Deere’s equipment revenue for the quarter came in at $11.4 billion, topping Refinitiv analysts’ estimates of $11.28 billion.
Net income rose to $1.96 billion, or $6.55 per share, outpacing analysts’ estimates of $5.57 earnings per share.
Global net sales and revenue increased 32% to $12.65 billion from $9.57 billion for the first fiscal quarter ending in January.
