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By Allison Prang
Deere & Co. reported stronger-than-expected sales in its second quarter and raised expectations for the year.
But the equipment maker on Friday said it is continuing to face higher freight and material costs, and that it would have to raise prices and focus on cutting costs as a result.
Total net sales and revenues rose 29% to $10.72 billion. Sales in the company's agriculture and turf segment and its construction and forestry segment both climbed, the latter of which was substantially helped by Deere's recent purchase of Wirtgen, a private construction equipment company in Germany.
Analysts polled by Thomson Reuters were expecting revenue of $9.79 billion.
Total costs and expenses at Deere rose at a slightly faster pace, climbing 31% to $9.34 billion. Chief Executive Samuel Allen said in prepared remarks that the company is "experiencing higher raw-material and freight costs, which are being addressed through a continued focus on structural cost reduction and future pricing actions."
The company reported a profit of $1.21 billion, or $3.67 a share, an increase of 49% from $808.5 million, or $2.50 a share from the same period a year ago.
On an adjusted basis, Deere said it made $1.03 billion, or $3.14 a share. Analysts were expecting the company to make $3.31 a share on an adjusted basis.
Deere increased its outlook for the year and now expects to make a profit of about $2.3 billion and sees net sales and revenue rising by about 26%. The company had previously expected $2.1 billion in profit and an increase in net sales and revenue of about 25%. Deere also forecasts its annual profit results to include an $803 million impact from the new tax law.
Last quarter, Deere's sales growth was impacted by issues the company had in its supply chain. Mr. Allen said Friday that the company "made significant progress working with its suppliers to ramp up production and ensure that products reach customers in a timely manner."
Shares of Deere fell 0.8% premarket. They've risen 30% in the past 12 months but so far in 2018 have fallen 6.2%.
Write to Allison Prang at email@example.com
(END) Dow Jones Newswires
May 18, 2018 07:36 ET (11:36 GMT)
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