& Co. said it expects strong demand for farm and construction equipment to continue next year, as supply-chain constraints ease after holding back shipments to customers in 2022.
The world’s largest seller of farm tractors and crop harvesters on Wednesday reported a surge in quarterly sales and profit, driven by rising prices and higher shipments of machinery that had been delayed by parts shortages earlier. Deere’s profit forecast for next year topped analysts’ expectations, as the company said it anticipates sales of large farm equipment, its biggest business unit, to rise by 15% to 20% over 2022’s level.
“The order books continue to fill when we open them,” said Chief Executive John May during a conference call.
Deere’s shares climbed 5% Wednesday to close at $437.52. The stock has gained about 25% this year, compared with a 16% decline in the S&P 500 stock index.
The company, based in Moline, Ill., said equipment inventories at its dealers remain low as its factories focus on building equipment already ordered, and completing partially built machines that have been waiting for parts. The company said it shipped about $400 million worth of large farm machinery during the most recent quarter that had been awaiting components.
Elevated prices for farm commodities are keeping farmers in the market for new equipment, even as their costs for seed, fertilizer, fuel and other production expenses have increased. Deere’s own costs have risen as well, but the company has been raising equipment prices to offset those increases, as well as unfavorable currency exchange rates on its foreign sales.
Deere said higher prices accounted for about 50% of the $1.74 billion in profit from its large farm equipment business during the three months ended Oct. 30. Quarterly sales from the business rose 59% from the same period last year when the company’s production was reduced by striking employees who are members of the United Auto Workers union.
Higher prices also helped to boost Deere’s construction and forestry machinery sales, which increased by 20% during the quarter from the same period last year. The company said it expects higher equipment demand from construction equipment rental businesses and the oil-and-gas industry, along with elevated spending on infrastructure projects in the U.S. next year, all of which should counter lower demand from the residential construction sector. The company forecast sales of construction and forestry machinery next year increasing by about 10%.
Deere forecast net income of $8 billion to $8.5 billion for its fiscal year ending next October, up from $7.1 billion this year.
For the most recent quarter, Deere said net income rose to $2.25 billion, or $7.44 a share, from $1.28 billion, or $4.12 a share, a year earlier. Analysts polled by FactSet were expecting earnings of $7.11 a share. Combined equipment sales and revenue from the company’s financing business rose by 37% from last year to $15.54 billion.
—Will Feuer contributed to this article.
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