Drought impact felt as record Deere profit falls short of forecast

Agricultural and landscaping equipment maker Deere & Co. on Wednesday posted record third-quarter profit and sales, although the drought that has much of the nation in its grip dropped the results below analysts' expectations.

The Moline, Ill.-based company reported revenue grew at a weaker-than-expected pace in the quarter that ended July 31  and a stronger dollar weighed negatively on foreign exchange rates.

Deere said sales were pressured by the drought in the United States and Argentina that has reduced tractor sales as well as slowed sales in international markets.

Deere, with major manufacturing operations in Waterloo, reported net income of $788 million, or $1.98 a share, compared with $712.3 million, or$1.69 a share, a year earlier. Analysts who follow the agriculture and landscape equipment sector  had been looking for $2.38 per share.

Deere's revenue rose 15 percent to $9.6 billion for the three months ended July 31 from $8.4 billion a year ago. That also was slightly below analysts' forecast of $9.53 billion.

Shares of Deere fell more than 7 percent in early trading Wednesday to $74.50 following the earnings release.

Deere said it believes the drought will further tighten grain supplies worldwide, which will lead to higher commodity costs and increased tractor sales next year as "robust field activity" will be needed to plant the 2013 crop.

For its full fiscal year ended Oct. 31, Deere lowered its forecast of net income to $3.1 billion from a previous projection of $3.35 billion. Worldwide sales of agriculture and landscaping equipment are forecast to increase by about 13 percent for the full year.

"Global economic conditions and dryness in several key markets warrant some caution in coming months," said Samuel Allen, Deere chairman and chief executive officer.