Deere’s stock powers up after big profit and sales beats, raised full-year outlook

Sales grew 30% to $17.39 billion, to beat the FactSet consensus of $14.89 billion, as production and precision agriculture sales jumped 53%, small agriculture and turf sales increased 16% and construction and forestry sales rose 23%.

The stock
DE,
-1.88%
rallied 3.9% in premarket trading, enough to make it the S&P 500 index’s
SPX,
-0.14%
biggest gainer ahead of the open.

Among Deere’s business segments:

• Production & Precision Agriculture sales jumped 52.9% to $7.82 billion, above the FactSet consensus of $7.29 billion. Operating profit more than doubled, rising 105.3% to $2.17 billion, as operating margin improved by 7.0 percentage points to 27.7%.

• Small Agriculture & Turf sales increased 16.1% to $4.15 billion to beat expectations of $3.74 billion. Operating profit rose 63.3% to $849 million, as operating margin improved 5.9 percentage points to 20.5%.

• Construction & Forestry sales grew 22.9% to $4.11 billion, topping expectations of $3.88 billion. Operating profit edged up 2.9% while operating margin contracted by 3.9 percentage points to 20.4%.

“As shown by the company’s outstanding second-quarter results, Deere continues to benefit from favorable market conditions and an improving operating environment,” said Chief Executive Officer John May.

The company raised its full-year guidance range for net income to $9.25 billion to $9.50 billion from $8.75 billion to $9.25 billion.

For its business segments, the company affirmed its fiscal 2023 sales growth outlook for Production & Precision Agriculture of up about 20%, lifted its outlook for Small Agriculture & Turf to up about 5% from flat to up 5% and revised higher its guidance for Construction & Forestry to up about 15% from up 10% to 15%.

The stock has dropped 13.6% year to date through Thursday, while the Industrial Select Sector SPDR exchange-traded fund
XLI,
-0.24%
has tacked on 1.8% and the S&P 500 has gained 9.3%.