Deere & Co. reported better-than-expected earnings and raised its outlook for fiscal 2022 as a booming agricultural economy helps the farm machinery maker weather supply chain issues, raw materials inflation raw materials and social unrest.
Deere and other equipment manufacturers are taking advantage of rising crop prices that are increasing farmers’ incomes, giving them the means to replace aging tractor fleets. That and price increases are helping Deere stay ahead of rising production costs. The findings come even after the company’s first strike since the 1980s led to weeks-long delays in parts orders during the busiest season of the year.
Supply constraints appear to be gradually easing based on U.S. factory activity indicators, an encouraging sign for Deere and other heavy equipment makers, according to Bloomberg Intelligence.
The company forecasts net income of $6.7 billion to $7.1 billion for 2022, down from a previous range of $6.5 billion to $7 billion, according to a statement on Friday. In the first quarter ended Jan. 30, net earnings per share were above the average of analyst estimates compiled by Bloomberg.
Deere said Friday it incurred a $90 million cost in the first quarter related to a signing bonus for unionized employees.
The company expects net sales from its manufacturing and precision agriculture businesses to increase 25-30% in 2022, while its small agriculture and turf businesses will grow about 15%. Sales in the construction and forestry sector will increase by 10% to 15%.
Earlier this month, competitor AGCO Corp. said supply chain issues would begin to ease this year, but semiconductor lockdowns would last through the end of 2022.
Shares of Moline, Ill.-based Deere swung between gains and losses on Friday morning in New York amid swings in the broader market. The stock is up about 9% this year.