Deere, the world's largest maker of farm machinery, reported lower-than-expected sales and profits in the latest quarter and said raw material costs would hurt profits in the fourth quarter, sending shares down almost 9 percent in pre-market trading.
Net profit rose 7 percent to $575.2 million, or $1.32 a share, in its fiscal third quarter, as soaring crop prices boosted global demand for its agricultural equipment.
A year earlier Deere earned $537.2 million, or $1.18 a share. Analysts on average expected Deere to earn $1.36 per share. Total revenue rose 17 percent to $7.74 billion, while equipment sales were $7.07 billion, short of the $7.17 billion forecast by Wall Street, according to Reuters Estimates.
Deere reported sharply higher revenue and profits in its agricultural segment, but lower sales and profits in its commercial and consumer, and construction and forestry, segments. Its financial services arm also posted a lower profit.
Moline, Illinois-based Deere said high raw materials costs were a factor in each of its equipment divisions and said costs were escalating and would have an impact on margins in the fourth quarter.
Deere estimated fourth-quarter net income of $425 million and said Deere equipment sales would rise about 29 percent in the quarter.
The pressure from higher costs comes as Deere and rival farm equipment makers CNH Global and Agco Corp enjoy record demand for their products, thanks to the surge in investment in biofuels and increased consumption in the developing world.
Higher farm incomes have translated into sharply higher sales of tractors and combines.
On Tuesday, the U.S. Agriculture Department said U.S. farmers will reap a near-record corn crop this autumn, despite spring floods that raised fears of shortages.
But higher output could translate into lower commodity prices and, in turn, weaker equipment demand in 2009.
Deere shares were at $63.22 in pre-market trading, versus their Tuesday close of $69.35.