DE Deere and Co

By Bob Tita and Austen Hufford 

Deere & Co. reported strong demand in its construction and farming markets in the latest quarter but said it would cut costs and raise prices due to higher raw material and logistics expenses.

Costs for steel and aluminum have been pushed up by U.S. tariffs on imported metal and a nationwide truck shortage has led to increased shipping expenses for many companies.

Deere is just the latest manufacturer to face concerns over whether rising costs will take away some of the gains from a strong global economy.

Shares fell 3.2% in premarket trading as the company posted adjusted earnings per share in the quarter that were below analyst expectations.

Deere also said Friday it continued to see demand for agricultural equipment in its third quarter even as customers worried what potential tariffs on farmed products would mean to their businesses.

"Replacement demand for large agricultural equipment is driving sales even in the face of tensions over global trade and other geopolitical issues," Deere Chief Executive Sam Allen said.

The Moline, Ill., company reaffirmed its overall revenue and profit forecast for the year.

The company predicts overall sales of farm and construction equipment will increase by about 30% for the year ending Oct. 31, up from $33.7 billion the previous year. The company continues to forecast adjusted net income of $3.1 billion.

Total revenue rose 32% to $10.31 billion. Third-quarter results were boosted by the company's December purchase of German road-paving equipment company Wirtgen Group for EUR4.48 billion ($5.33 billion).

The company now expects sales of farm equipment to grow 15% this year, up from its prior forecast due to more favorable dairy and livestock sectors.

The company expects sales in its construction equipment unit to jump 81% this year, with 55% due to the Wirtgen deal, as it also sees increased home building in the U.S., more activity in the oil and gas sector and economic growth globally.

In all for the quarter ended July 31, Deere reported net income of $910.3 million, or $2.78 per share, up from $641.8 million, or $1.97 per share, a year earlier. On an adjusted basis, excluding certain items, the company earned $2.59 a share, as equipment sales rose 36% to $9.29 billion. Analysts were expecting $2.75 a share on sales of $9.21 billion.

Write to Bob Tita at robert.tita@wsj.com and Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

August 17, 2018 08:39 ET (12:39 GMT)

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