Deere Posts Strong Results; Ups Guidance

 Deere & Co. (NYSE: DE – $122.04) reported a 62% jump in quarterly profit, helped by improving demand for its products, and the U.S. farm equipment maker raised its fiscal 2017 financial forecast. Net income rose to $802.4 million, or $2.49 cents per share, in the second quarter from $495.4 million, or $1.56 cents per share a year earlier and $0.26 above analysts’ estimates. Worldwide sales rose 5.2% to $8.29 billion. Agriculture & Turf revenue increased 1% for the quarter and the first six months, primarily due to price stabilization. Construction and Forestry segment sales increased 7% in the quarter and 1% for the first six months, mainly as a result of higher shipment volumes and price increases, partially offset by higher warranty costs. According to the company, market conditions showed signs of further stabilization and says it’s seeing modestly higher demand, especially in South America. Full-year 2017 revenue is now expected to increase 9%, compared with previous guidance for 4%. Moline, Illinois-based Deere also raised it income guidance by $500 million to $2 billion and now expects full-year earnings per share of $4.94 and revenue of $24.32 billion, a 9 percent increase over last year.

        The shares bounced over 8% in today’s trading to a new record and higher by 36% over the past year. However, the valuation is getting a bit stretched, and any unexpected weakness make the shares vulnerable. Nonetheless, I am holding on to the position in the conservative portfolio for the long-term. The high-quality shares also yield investors  2.1%.

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