Deere profit falls on slowed farm equipment sales

Deere posted a sharp drop in quarterly earnings on Wednesday and forecast a further slump in agriculture and construction equipment sales in its new fiscal year.

Still, shares of the maker of John Deere tractors rose 5 percent in premarket trading as the profit exceeded Wall Street estimates.

"Folks were gearing themselves for a meaningfully worse outlook," said Robert Baird & Co analyst Mircea Dobre.

Deere also said it might raise its dividend and would consider buying back stock.

The company said it expected sales to be down about 7 percent in its first quarter, which began on Nov. 1, and down about 11 percent for the year.

Deere forecast net income attributable to the company at about $1.4 billion, down from $1.94 billion reported for fiscal 2015. However, Dobre said analysts were expecting an outlook of $1.0 billion and $1.2 billion.

In the fourth quarter ended on Oct. 31, net income attributable to Deere fell to $351.2 million, or $1.08 per share, from $649.2 million, or $1.83 per share, a year earlier.

Analysts on average had expected a profit of 75 cents per share, according to Thomson Reuters I/B/E/S.

Earnings from equipment operations dropped to $335 million from $910 million.

The company forecast an increase in capital expenditures to about $800 million for fiscal 2016 from about $688 million for the prior year.

Deere has already repurchased about $16.2 billion in shares between 2004 and 2015. And the stock dividend has been raised 114 percent since 2010, the company said.