Deere & Co. lifted its earnings guidance above analyst estimates, with elevated crop prices and an improving farm economy signaling a record windfall for the biggest maker of agricultural machinery. Shares surged to an all-time high.
After a trade war and pandemic disruptions, Deere is betting that American farmers are finally ready to overhaul aging fleets as grain prices reach multiyear highs and agricultural profits soar amid a flood of government aid. Federal Reserve Bank of Chicago economist David Oppedahl called the agricultural outlook “the rosiest in years” based on a survey of bankers.
The company is in “early days in terms of seeing some of this demand pick up,” executives said on a conference call with analysts and investors. Orders into the fourth quarter are “a good indicator of the replacement demand that we’ve been expecting.”
Net income for fiscal 2021 is forecast at $4.6 billion to $5 billion, the Moline, Illinois-based producer said in a statement Friday. That compares with the $3.6 billion to $4 billion that Deere forecast in November, and the $4.06 billion average of analysts’ estimates compiled by Bloomberg.
For the fiscal year ended in November, net income was $2.75 billion.
The manufacturer has set a high bar for performance going into 2021, with its shares jumping 55% last year, the most since 2007. Improving farm fundamentals and sentiment will help drive double-digit revenue growth at Deere in 2021, according to Bloomberg Intelligence, which also cautioned that supply-chain disruptions and rising costs remain risks.
“Our results were aided by outstanding performance across our business lineup and improving conditions in the farm and construction sectors,” Chief Executive Officer John May said in the statement.
Competitor AGCO Corp. earlier this month forecast 2021 adjusted earnings per share that beat the average analyst estimate, with the company saying it sees North American margins increasing for the year.
Deere shares rose as much as 12% to a record $335.21. The stock was up 10% at 12:44 p.m. in New York.
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