CHICAGO -- Deere & Co., the largest agricultural equipment maker, raised its full-year profit forecast and posted quarterly earnings that topped analysts' estimates after record prices for corn and soybeans boosted farmers' incomes.
Net profit was $1.65 a share in the financial first quarter ended Jan. 31, beating the $1.40 average of 17 estimates compiled by Bloomberg. Earnings will be about $3.3 billion for fiscal 2013, the Moline, Ill.-based company said in a statement on Feb. 13. That exceeded its previous prediction of $3.2 billion and the $3.26 billion average of 16 estimates.
"As long as farm income remains elevated you will see high levels of sales," said Stephen Volkmann, a New York-based analyst for Jefferies & Co., said in a telephone interview on Feb. 13. "The agricultural business was well ahead of our model."
Deere Chairman and Chief Executive Officer Sam Allen has introduced a record number of new products and built factories from Brazil to China as higher commodity prices put more cash in farmers' pockets in the last three years. In the U.S., where Deere is the market leader, farming receipts rose 5.4 percent to a record $219.6 billion, the Department of Agriculture said Feb. 11.
First-quarter net income increased 22 percent to $649.7 million from $532.9 million a year earlier. Equipment sales climbed 11 percent to $6.79 billion, compared with Deere's November forecast for a 10 percent gain. Revenue from machinery gained 18 percent in the U.S. and Canada and 2 percent in the rest of the world.
For fiscal 2013, Deere said equipment sales will advance about 6 percent, higher than its previous prediction of 5 percent.
For the industry as a whole, agricultural-equipment sales in the U.S. and Canada will be unchanged to 5 percent higher as the domestic livestock industry partly offsets strength in demand for large equipment such as high-horsepower tractors and combines, the company said.
The industry's revenue in South America will rise as much as 15 percent, driven by Brazil. The industry's sales in the European Union will be down about 5 percent due to economic weakness and last year's poor harvest in the U.K.
Corn futures reached a record $8.49 a bushel in August on the Chicago Board of Trade. Their average price during Deere's first quarter was 16 percent higher than a year earlier as the worst U.S. drought since the 1930s reduced the crop to the smallest in six years. Soybean futures on average were 22 percent higher, having touched a record $17.89 a bushel in September, as the crop shrank for a third year in a row.
U.S. farmers have collected a record $14.2 billion in insurance payments triggered by the adverse weather, the USDA said in a Feb. 11 report on its website. Deere's sales of four- wheel tractor and combine sales in December topped U.S. industrywide gains, the company said last month. Deere got 64 percent of sales from the U.S. and Canada in fiscal 2012.
The company also has gained market share in Brazil, where it "outperformed" in tractors and combines last month, JPMorgan Chase & Co. said. Brazil is one of the countries Deere is focusing on as it aims to boost annual sales to $50 billion by 2018.