Deere raises annual profit outlook on healthy equipment demand

By Bianca Flowers and Aishwarya Nair

(Reuters) -Deere & Co on Friday reported a rise in second-quarter profit on strong sales for its tractors and precision agriculture equipment, and raised its 2023 net income forecast for the rest of the year as its order books remain robust.

Shares in the world’s largest farm equipment maker were up 4% in premarket trading after the company reported a 36% rise in quarterly profit.

Net income increased to $2.86 billion from $2.1 billion a year ago.

Deere (NYSE:) expects 2023 net income in the range of $9.25 billion to $9.50 billion, higher than the $8.75 billion to $9.25 billion forecast earlier.

The industrial bellwether, a barometer for the global economy, has maintained resilient operating profit margins, despite global market volatility.

Farmers’ demand for new equipment and parts to repair aging machinery has bolstered Deere’s sales. Even though crop commodity prices continue to come down from last year’s peak, which spurred spending from growers to upgrade their fleets, executives have reiterated that order books are still robust.

The company’s precision agriculture division’s retail sales outpaced other segments with a 53% jump in revenue. Operating profit increased 105% year-over-year.

Smaller rival AGCO Corp also posted record-beating quarterly results this month and raised its full-year sales forecast, helped by strong combine sales in North America and purchases of large tractors for planting season.

Deere has leveraged price increases across its equipment lines to counter higher material and logistics costs.

The Moline, Illinois-based company has sustained margin improvements by mitigating cost pressures across its equipment divisions as well as constraints in supply chains that are only now moderating for most industrial companies.

Total net sales and revenues rose 30% to $17.39 billion for the second quarter.