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Deere stock soars on an unexpected rise in profits

Reuters logo Reuters 2/21/2020 Rajesh Kumar Singh
a close up of a sign © Reuters / Mohammad Khursheed  

Deere on Friday reported an unexpected increase in first-quarter profit and retained its full-year earnings forecast as signs of stabilization in the U.S. farm sector offset weak demand for construction machines, sending its shares soaring.

The farm equipment manufacturer reported net income of $517 million, or $1.63 per share, for the quarter ended Feb. 2, up from $498 million, or $1.54 per share, in the same period last year.

That compares with the average analyst estimate of $1.26 per share, according to Refinitiv Eikon data.

The Moline, Ill., company still expects net income in 2020 to be in the range of $2.7 billion to $3.1 billion.

The world's largest farm equipment maker's shares were last up 9% at $180.75.

Deere's earnings in the past quarters were buffeted by a nearly two-year-long U.S.-China trade war that hit U.S. agricultural exports, leaving farmers struggling to turn a profit.

But President Donald Trump's interim trade deal with China has raised hopes of a recovery in farm machinery demand.

"Farmer confidence, though still subdued, has improved due in part to hopes for a relaxation of trade tensions and higher agricultural exports," Chief Executive John May said in a statement.

Improved pricing power along with lower production costs and warranty expenses in the latest quarter drove up operating profits at its farm and turf business, which accounts for nearly 60% of Deere's revenue.

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