Deere & Co. said its fiscal first-quarter earnings rose a better-than-expected 55 percent, as soaring crop prices boosted demand for agricultural equipment across the globe.
The company also raised its for full-year profit forecast, citing even stronger global demand for its tractors and combines than it had earlier forecast.
Shares of Deere were down almost 2 percent after an initial rise in trading on the New York Stock Exchange.
"Just when you think we're starting to get too aggressive, they raise it again," said John Kearney, an analyst at Morningstar, who has a 3-star rating on the stock and does not own any shares. "This market is just so strong it's hard to keep up."
Deere and rival farm equipment makers CNH Global and Agco Corp are enjoying record demand for their products thanks to the surge in investment in biofuels as well as increased consumption in the developing world.
The two trends are lifting farm incomes, which are highly correlated with tractors and combine sales.
On Tuesday, the United States Department of Agriculture predicted that 2008 would be another record year for producers, particularly of wheat, corn, soybeans and other related crops, thanks to continued strong demand from exports and biofuels.
The USDA reported that wheat stocks in particular are at the lowest levels in 60 years. That's sent prices soaring and is likely to spur additional investment by farmers who, according to Bear Stearns analyst Ann Duignan, like to "replace old equipment in 'the good times."'
In its most recent quarter, Deere, the world's largest maker of agricultural machinery, said earned $369.1 million, or 83 cents a share, compared with $238.7 million, or 52 cents a share, a year earlier.
Analysts, on average, expected the Moline, Illinois-based company to report a profit of 77 cents a share, according to Reuters Estimates.
The gains were driven by especially strong results overseas. Sales outside the United States and Canada rose 37 percent, helped, in part, by the weak U.S. dollar.
Deere's farm equipment sales rose 33 percent, while sales of construction and forestry equipment declined 6 percent, reflecting the woes of the U.S. housing market.
Those woes are expected to continue throughout 2008, despite the recent round of aggressive interest rate cuts by the U.S. Federal Reserve, the company said.
But the company said it expects 2008 global sales of forestry and construction equipment to be in line with 2007 as building activity outside the United States offset the slump here.
And even though construction and forestry sales slipped in the most recent quarter, margins improved. "That's definitely a good thing," said Morningstar's Kearney. "The incremental margins are pretty impressive."
Looking forward, Deere expects a full-year profit of $2.2 billion, up from an earlier forecast of $2.1 billion.