The Wall Street Journal-20080214-Earnings Digest- Deere Net Surges- Demand Fuels Forecast Boost

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Earnings Digest: Deere Net Surges; Demand Fuels Forecast Boost

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Buoyed by a world-wide agriculture boom, Deere & Co. posted a 55% rise in fiscal first-quarter profit and said it is looking forward to increased sales of equipment such as big tractors, combines and sprayers.

The company increased its sales-growth estimate to 17% this fiscal year from a 12% prediction last quarter.

World-wide grain stockpiles are at some of the lowest levels in decades while prices for corn, wheat and soybeans are at or near record highs, plowing money into farmers' pockets globally.

That means Deere customers -- farmers from Russia to China to Brazil and the U.S. -- are increasingly able to afford bigger, more profitable equipment. The Moline, Ill., company raised its full-year net-income forecast to $2.2 billion from $2.1 billion.

To meet surging demand, the company also raised its projected spending on research and development and other capital expenditures. Company executives hinted on a conference call with investors that Deere was considering adding production capacity, without elaborating.

"Our order books have continued to develop very nicely" throughout the globe, Marie Ziegler, Deere's vice president of investor relations, said on the conference call. "We've certainly seen strength at the larger end of the horsepower range. Big combines and big tractors are doing well in a lot of geographies."

Deere said net income jumped to $369.1 million in its fiscal first quarter ended Jan. 31, and sales rose 18% to $5.2 billion. Sales didn't meet Deere's own forecast last quarter of an increase of about 25%. The company's shares fell 94 cents, or 1.1%, to $85.54 as of 4 p.m. in New York Stock Exchange composite trading.

Even with a slumping U.S. housing market, Deere's construction-and- forestry arm turned in a 23% increase in operating profit, surprising some analysts. Company executives said growing sales outside the U.S. of tree-harvesting machinery and earth-moving equipment, as well as price increases and streamlined manufacturing, helped offset declines in Deere's home market.

Overall, the typically conservative company -- something of a barometer for the strength of global commodities -- has been painting an increasingly rosy picture for the next couple of years, raising its forecast for most major U.S. grain prices in the 2007-08 and 2008-09 crop seasons.

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Bob Sechler contributed to this article.