Deere & Co., the world's largest maker of agricultural equipment, posted a profit Wednesday for its fiscal fourth quarter in contrast to a loss a year ago, citing improved conditions on U.S. farms but weakness in construction equipment sales.
The results beat Wall Street expectations, and it expects higher earnings for this fiscal year.
Its shares edged up 22 cents to $76.56 in morning trading.
Farmers in most of the company's key markets are experiencing solid levels of income due to strong global demand for agricultural commodities, low grain stocks in relation to use, and high prices for crops such as corn, wheat, soybeans, sugar and cotton," the company said in a statement.
But Deere is forecasting only flat farm machinery sales in the U.S. and Canada for the new year because of production limits and the pollution control regulations.
The Moline, Ill., company reported net income of $457.2 million, or $1.07 per share, for the quarter ended Oct. 31 compared with a net loss of $222.8 million, or 53 cents per share, a year ago.
Revenue rose 35 percent to $7.2 billion from $5.33 billion a year ago, due largely to stronger equipment sales, especially in the U.S. and Canada. However, the increase was partially offset by higher raw material costs.
Last year's fourth quarter featured weak sales and one-time charges from restructuring expenses and a write-down in the value of assets.
Deere beat Wall Street's estimates for the quarter. Analysts polled by Thomson Reuters expected earnings of 95 cents per share on revenue of $6.2 billion.
For the full year, the company famous for its green-and-yellow machinery earned $1.865 billion, or $4.35 per share, up from $873.5 million, or $2.06 per share, a year ago. Revenue rose to $26 billion from $23.1 billion a year ago.
CEO Samuel Allen said in a statement that conditions continued to be positive in the U.S. farm sector, including increased sales of larger equipment, but European agricultural markets remained soft.
"Deere's construction equipment sales benefited from somewhat-stronger overall demand but remained far below normal levels," he said.
The company predicted that equipment sales would rise 10 to 12 percent in the new fiscal year, including a 34 percent increase in the first quarter. The increase is due in part to what Deere said would be a record year for the introduction of new models because of stricter pollution control regulations worldwide.
The company expects net income of about $2.1 billion for the full year, with a sales rise partially offset by the cost of transitioning to the new models and increased costs to comply with the emissions regulations. The company also predicts higher raw material costs in 2011.
Deere also reported net sales of worldwide equipment rose 39 percent for the quarter, including a favorable currency translation of 1 percent and 3 percent in price increases.
Equipment sales in the U.S. and Canada rose 41 percent for the quarter, and outside those two countries it was up 36 percent.
In the Agriculture and Turf unit, sales were up 33 percent for the quarter because the company shipped more equipment and got higher prices for it, Deere said.
Agriculture and Turf operations posted an operating profit of $662 million for the quarter.
Deere's Construction and Forestry operations saw sales climb 75 percent in the quarter, with an operating profit of $54 million, also due to higher shipments.
The company expects Agriculture and Turf division sales to rise 7 to 9 percent in 2011 as global farming conditions continue to improve.
It also is forecasting a recovery in Western Europe with farm equipment sales up 5 to 10 percent in 2011, with Central Europe and the Commonwealth of Independent States seeing only moderate gains from depressed levels in 2010. Asia sales also are expected to grow moderately, and South America sales are expected to be flat, the company said.
Deere sees a larger recovery in its Construction and Forestry business, with sales rising 25 to 30 percent for the new year.