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Deere on the run as earnings smash expectations

“John Deere reported strong results in the second quarter as market conditions showed signs of further stabilization”
john deere tractor and combine harvester in field
The firm’s chairman and CEO reckons the worst of the “global farm recession” could be over

Shares in Deere & Company (NYSE:DE) soared on Friday morning after the lawnmower maker posted a forecast-beating set of quarterly results alongside a bullish outlook for the rest of the year.

The agriculture and construction machinery group saw net income for the three months to April 30 rise 62% to US$802.4mln, or US$2.49 a share, compared to the US$495.4mln, or US$1.56 a share, it posted in the same period last year.

Wall Street analysts had a forecast an earnings per share of US$1.63.

Total revenues also topped consensus forecasts as they jumped to US$8.29bn from US$7.88bn in the second quarter of 2016.

In addition to beating on both the top and bottom lines, Deere also raised its guidance for the year.

The world’s largest seller of tractors and harvesting combines now expects sales to rise by 9% through October, up from its previous estimate of about 4%.

Net income is also set to be higher than originally thought at US$2bn.

“John Deere reported strong results in the second quarter as market conditions showed signs of further stabilization,” said chairman and chief executive Samuel Allen.

“We are seeing modestly higher overall demand for our products, with farm machinery sales in South America experiencing a strong recovery.”

The solid performance and upbeat outlook will come as welcome news for Deere investors. The company has struggled recently as US demand for farm machinery has fallen, while the strengthening US dollar has also made its products more expensive abroad.

The return to growth was hinted at in the first quarter earnings release, in which Allen said “key agricultural markets may be stabilizing” after several years of steep declines.

The stock was up more than 6% in pre-market trading to US$120.90.

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