John Deere posted a bigger-than-expected second-quarter profit and its first sales increase in 13 quarters, apparently confirming its view that key markets for its farm equipment are stabilizing.
For the first quarter, the world’s largest farm-equipment manufacturer earned a profit of $802.4 million, or $2.49 a share, compared to earnings of $495.4 million, or $1.56 cents, a year earlier.
Net sales increased 5% to $8.287 billion, with total equipment sales for the quarter rising 2.2% to $7.260 billion amid strong international farm equipment sales and higher demand for construction equipment as U.S. home sales surge. Analysts had forecast earnings of $1.70 a share on revenue of $7.32 billion.
“John Deere reported strong results in the second quarter as market conditions showed signs of further stabilization,” Deere CEO Samuel R. Allen said in a news release. “We are seeing modestly higher overall demand for our products, with farm machinery sales in South America experiencing a strong recovery.”
“Deere’s performance also reflects the sound execution of our operating plans, the strength of a broad product portfolio, and the impact of our actions to develop a more agile cost structure,” he added.
The company also raised its full-year 2017 earnings forecast to $2 billion on a 9% increase in sales after previously projecting $1.5 billion in net income on a 4% percent increase in sales. The company posted earnings of $1.52 billion in 2016.
As Business Insider reports, the second-quarter results “are more evidence Deere is seeing further stabilization in the industry. The company has been sounding the alarm on a ‘global farm recession’ it says has weighed on results over the past several quarters.”
In its previous earnings release, Deere cited signs that key agricultural markets were stabilizing and offered a surprisingly upbeat outlook for equipment sales growth, even with continued weakness in the U.S. market.
For the second quarter, sales in construction and forestry equipment rose 7% in the quarter. “Deere expects those numbers to jump about 13 percent for the year,” Reuters said, noting that economists “expect the U.S. housing market to take off.”