The results, which reflected strong sales to farmers and foresters, suggested a long-awaited ethanol-related spurt in spending on farm equipment might finally be under way.
Deere said it earned $238.7 million, or $1.04 a share, in its fiscal first quarter, which ended January, up from $235.9 million, or 99 cents a share, in the year earlier period.
Sales rose 5% from the same quarter a year ago to $4.43 billion.
Analysts surveyed by Thomson Financial expected a profit of 79 cents a share, with sales of $3.85 billion.
Deere raised its forecast for fiscal 2007 earnings to $1.4 billion from $1.33 billion, saying it expected an increase in agricultural equipment and commercial and consumer business to offset a decline in construction sales.
"Originally they were being really cautious about what the ag market was going to do in '07 and building out 2008 to be a little bit stronger," said Morningstar analyst John Kearney. "It looks like now 2007 isn't going to be so bad, which -- if you go on what they've been saying -- feeds hopes for an even stronger 2008."
Like Agco, CNH Global and other rivals, Deere has benefited from investor excitement over ethanol, the corn-based fuel additive, which has lifted the prices of several key commodities.
Since tractor and combine sales typically rise and fall with farmers' cash receipts, rising corn and soybean prices have raised expectations that the agricultural equipment industry is about to enjoy a surge in demand for its products.
But so far, that surge hasn't materialized. Earlier this week, a top trade group reported that North American agricultural equipment industry retail sales comparisons started the new year on what Robert McCarthy, an analyst at R.W. Baird, characterized as as "relatively downbeat note," with row crop and four-wheel-drive tractor sales both down "significantly."
Even so, most analysts -- and Deere itself -- believe the favorable farm economic conditions will ultimately translate into higher sales.
The Moline, Illinois-based company said it expects its overall sales to rise about 5% in the current quarter and to rise slightly for the full year, an improvement over its November forecast for flat sales for the year.
The improvement will come from agricultural sales, which will offset an anticipated decline in construction equipment as the once-hot U.S. housing market continues to correct and builders postpone purchases, Deere said.