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Deere's Outlook Is Cautious

First-quarter revenue rises 7%.
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Farm-machinery maker



said first-quarter revenue rose 7%, but the company issued cautious commentary about worldwide industry demand for agricultural equipment for the rest of the year.

The maker of John Deere tractors earned $235.9 million, or 99 cents a share, in the quarter ended Jan. 31, compared with $222.8 million, or 89 cents a share, for the same period last year. Revenue rose to $4.20 billion for the first quarter from $3.94 billion a year ago.

Analysts surveyed by Thomson First Call were looking for a profit of 83 cents and a top line of $4.06 billion for the quarter.

Net sales of equipment climbed to $3.69 billion from $3.53 billion. Excluding the effect of currency translation and price changes, worldwide equipment sales rose 4% for the quarter. On a reported basis, equipment sales in the U.S. and Canada increased 9%. Outside those two nations, sales were up 1% factoring out currency translation, but down 5% including the effects of foreign-exchange rates.

Compared with the prior-year periods, Deere expects that equipment sales will be unchanged to up 2% for the second quarter and higher by 3% to 5% for the full year. The company is forecasting net income of $725 million to $750 million for the second quarter and around $1.7 billion for the year. Deere didn't provide per-share estimates.

Deere said that global farm fundamentals remain generally positive in large part because of favorable levels of carryover stocks of wheat and corn. In the U.S. and Canada, the farm sector remains in sound overall condition. However, industry sales of agricultural equipment are now expected to decline about 5% this year owing to concerns over farm input costs and a slight decrease in cash receipts.

Industry retail sales in Western Europe will likely fall about 5% for the year, Deere said, while in South America, industry sales will probably be down about 20%. Based on these factors and market conditions, worldwide sales of John Deere agricultural equipment are projected to be flat to down 2% for the year.

Deere expects commercial and consumer equipment sales to rise 10% to 12% for the year. Worldwide sales of the company's construction and forestry equipment should grow 8% to 10% this year.