Despite production and supply chain challenges, major farm equipment manufacturers are reporting better than expected earnings thanks to strong demand for tractors and combines.
On Friday, Deere & Co. joined competitors CNH and AGCO in publishing quarterly financials this month that have exceeded analysts’ projections.
Deere said net sales from equipment operations for the first quarter, which included a major strike at its facilities in the U.S., were up about 6 per cent from last year, reaching US$8.53 billion.
“Deere’s performance in the first quarter was impressive given production issues surrounding the delayed ratification of our UAW contract in late November as well as persistent challenges posed by the supply chain and pandemic,” said John May, chairman and chief executive officer.
Deere’s earnings came in at $2.92 per share, exceeding expectations of around $2.26 per share.
Analysts’ projections and share prices for Deere had already risen after AGCO reported four-quarter profits of $3.08 per share last week, far exceeding the average expectation of $1.77 per share. In its Feb. 8 filings, AGCO reported North American tractor sales for the last quarter of 2021 were up 14% versus the previous year, while combine sales were 24 per cent higher.
CNH also reported earnings above Wall Street’s expectations last week. The company said large tractor (over 140 horsepower) demand was up 23 per cent in North America, while combine sales were up 25 per cent in the last quarter.
Deere reported a 9 per cent increase in net sales in its production and precision agriculture category on Friday. The $244 million increase in sales was driven by higher prices and volumes, but operating profit was offset by a $407 million increase in production costs, said Deere.
The company also raised its fiscal 2022 net income forecast to between $6.7 billion and $7.1 billion on Friday, up from a prior estimate of $6.5 billion to $7.0 billion. The forecast includes a 25-30 per cent increase in net sales in the production and precision agriculture category.
“Looking ahead, we expect demand for farm and construction equipment to continue benefiting from strong fundamentals,” said Deere’s May.