DE Deere and Co

By Austen Hufford and Bob Tita 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 18, 2018).

Deere & Co. said Friday that farmers are continuing to buy equipment even as they worry about potential tariffs on their products.

In recent months, other countries have imposed or threatened to impose retaliatory tariffs on U.S. farm goods following actions by the Trump administration.

U.S. farmers have been awaiting details of a $12 billion aid proposal that the administration says would support prices of commodities caught up in trade disputes.

"Trade issues have weighed on farmer sentiment more recently," John May, Deere's head of agricultural solutions, said on a call with analysts Friday to discuss the equipment maker's quarterly results. "With sentiment likely to remain fluid over the coming months, farmers continue to show a strong willingness to invest in technology that improves both productivity and economic outcomes."

Deere reported that its cost of goods sold in its just-ended fiscal third quarter ticked up to 77% of net sales from 75% in the prior quarter.

Steel and aluminum prices have been pushed up by U.S. tariffs on imported metal, and Deere said it is raising prices to offset higher raw-material costs. The Moline, Ill., company is just the latest manufacturer to disclose higher expenses, raising concerns that rising costs might blunt profit gains from a strong global economy.

Deere shares rose 2% on Friday afternoon as the company said it benefited from farmers replacing their equipment as well as from increased investment in oil and gas and more home building.

The company affirmed its financial outlook for the year ending Oct. 31, including a 30% rise in its sales of farm and construction equipment to $33.7 billion. It expects adjusted net income of $3.1 billion.

The company raised its growth forecast for farm-equipment sales to 15% this year, citing more favorable dairy and livestock sectors.

The company expects construction-equipment sales to jump 81% in the current fiscal year, with a big boost coming from its purchase in December of German road-paving equipment company Wirtgen Group for EUR4.48 billion ($5.33 billion). It also cited increased home building in the U.S., more oil-and-gas activity and more spending on transportation infrastructure.

In all for the quarter ended July 29, Deere reported net income of $910.3 million, or $2.78 a share, up from $641.8 million, or $1.97 a share, a year earlier. On an adjusted basis, excluding certain items, the company earned $2.59 a share; analysts polled by Thomson Reuters were expecting $2.75 a share.

Equipment sales rose 36% from a year earlier to $9.29 billion, topping analysts expectations for $9.21 billion.

Total revenue, including in Deere's financing unit, rose 32% to $10.31 billion, boosted by the addition of Wirtgen.

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

Corrections & Amplifications The company's quarter ended on July 29. An earlier version of this article incorrectly stated the quarter ended later in the month. (Aug. 17, 2018)

(END) Dow Jones Newswires

August 18, 2018 02:47 ET (06:47 GMT)

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