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Deere Sales Miss Expectations Despite Strong Growth

Shares of agriculture and construction machinery manufactured Deere & Co. (NYSE: DE $116.97) retreated in early trading, despite reporting strong results. Total revenue for the third quarter, including Deere’s financial-services business, rose 16% to $7.81 billion. Net equipment sales reached $6.83 billion, up 17% from last year, but shy of Street views of $6.92 billion. Deere said sales of farm and construction equipment in the U.S. and Canada grew 11% in its third quarter, while sales elsewhere in the world increased 25%. Earnings for the period was $641.8 million, or $1.97 per share, compared with $488.8 million, or $1.55 a share, a year earlier and two cents above expectations. The company still faces headwinds from U.S. farmers and crop prices, which is being partly offset by higher-growth markets internationally, especially in South America. Looking ahead, equipment sales are expected to climb 24% in the fourth quarter and rise 10% for the fiscal year and m raised full-year earnings guidance to $$2.08 billion from $2 billion.

        Elsewhere, the Moline, Illinois company agreed to acquire Germany’s Wirtgen Group for about $5.12 billion in June. Wirtgen, with strong operations in China and Brazil, could be an opportunity for Deere to increase its volume those regions. The shares are trading at an extended valuation compared to historic norms based on the improved outlook, but conservative investors may want to hold on for the longer-term.

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