Deere Gallops Ahead

Fourth-quarter numbers leap over targets.
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Deere (DE) - Get Report galloped past fiscal fourth-quarter targets Tuesday.

The Moline, Ill., tractor giant made $277 million, or $1.20 a share, for the quarter ended Oct. 31, up from the year-ago $233 million, or 96 cents a share. Sales rose 3% from a year ago to $5.12 billion. Analysts surveyed by Thomson Financial were looking for a 94-cent profit on sales of $4.79 billion.

"Our strong results for the final quarter of 2006, and for the full year, provide mounting evidence of our success in building a fundamentally more agile and profitable business, while introducing advanced new products and services to a growing global customer base," said CEO Robert W. Lane. "We are particularly encouraged that the company achieved record net income for the year and strong cash flow in the face of market conditions that have been relatively weak in many parts of the world."

Net sales of the worldwide equipment operations were essentially unchanged for the quarter and 2% higher for the full year. Included were positive effects for currency translation and price changes of 4% for the quarter and 3% for the year. Equipment sales in the U.S. and Canada were 6% lower for the quarter and 3% higher for the year. Net sales outside the U.S. and Canada increased by 14% for the quarter and 2% for the year, including a positive currency-translation effect of 2% for the quarter and a negative effect of 1% for the year.

Deere's equipment divisions reported operating profit of $276 million, up from $224 million last year. Higher operating profit for the quarter was primarily the result of improved price realization and lower warranty expenses, partially offset by higher selling and administrative expenses, increased raw-material costs, and the impact of lower shipping and manufacturing volumes.

Deere's ongoing emphasis on rigorous asset management is continuing to yield positive results. Trade receivables and inventories at the end of the quarter were $4.995 billion, or 25% of previous 12-month sales, compared with $5.253 billion, or 27% of sales, a year ago. With the company's fourth-quarter performance, trade receivables and inventories in relation to sales have now declined for 26 consecutive quarters as compared with the same quarter of the prior year.

Deere said it expects sales to rise 5% in the first quarter. It pegged net income at $150 million to $175 million.