Deere lifts full-year earnings forecast on resilient farm equipment demand

The Illinois-based company expects net income of about $2.3bn for the full year

A John Deere combine harvester is seen harvesting winter wheat in a field in the UK. Reuters

Deere, the world's largest farm equipment maker, lifted its full-year earnings forecast on Friday after a smaller-than-expected decline in quarterly profit, as the sector benefits from replacement demand and government stimulus.

The Illinois-based company said it now expects net income of about $2.3 billion (Dh8.3bn) for the full year, higher than $1.6bn to $2bn estimated earlier.

Profit for the latest quarter came in at $2.57 per share - an 8.5 per cent annual decline compared with a 55 per cent drop expected by analysts in a Refinitiv survey. Similarly, equipment sales fell 12.4 per cent yearly to $7.9bn, lower than Wall Street's estimate of a 25.3 per cent decrease.

Deere's shares, which have gained 36 per cent since its last earnings report, were up 4.5 per cent in pre-market trade.

"Although unsettled market conditions and related customer uncertainty are expected to have a moderating effect on key markets in the near term, we believe Deere is well-positioned to help make our customers more profitable and sustainable," chief executive John May said in a statement.

The company pared its forecast for sales declines at its farm and construction equipment divisions.

Sales of tractors and combines for the year are expected to be down 10 per cent, compared with a 10 per cent to 15 per cent drop estimated in May, helped by improved demand in North America and Asia.

Construction and forestry machine sales are estimated to decline an annual 25 per cent.

The coronavirus pandemic has lowered commodity prices, squeezing farmers who are still reeling from the US-China trade dispute. However, farmer sentiment has rebounded on the back of improved planting conditions as well as additional government subsidy payments.

President Donald Trump has announced a $19bn relief programme to help US farmers cope with the impact of the health crisis. Also aiding agricultural equipment demand is a growing need for farmers to replace their ageing tractors and combines.