Deere & Co stocks are soaring higher on Wednesday after the company shocked analysts with unexpectedly high earnings. The fourth quarter results were largely due to improving machinery demand, an area the company had struggled with since 2014. The company also raised it’s 2018 sales estimate by a whopping 19% resulting in an earnings projection of $2.6 billion if realized.
The main contributor to the sharp earnings increase was a 23% surge U.S. and Canadian net equipment sales during the fourth quarter. Other divisions rose as much as 30%. Net income attributable to the company rose 79 percent to $510.3 million or $1.57 per share in the fourth quarter, while total net sales rose 25.5 percent to $7.09 billion.
Analysts had expected fourth-quarter earnings of $1.47 per share and sales of $6.99 billion. This is the fifth quarter in a row the company has outperformed expectations.
“John Deere has completed another successful year as markets for farm and construction equipment showed improvement and our actions to build a more durable business model yielded strong results,” said Samuel R. Allen, chairman and chief executive officer, adding that the year’s sales and earnings were the fifth-highest in company history. “We saw higher overall demand for our products with farm machinery sales in South America making especially strong gains and construction equipment sales rising sharply. At the same time, the company realized continued benefits from its broad product portfolio and agile cost structure. As a result, Deere has remained well-positioned to serve present customers while making investments aimed at driving growth and attracting additional customers in the future.”
Investments made or announced during the year included the acquisition of the Wirtgen Group, the
world’s leading manufacturer of road construction equipment. The transaction is expected to be finalized next month. “Wirtgen will establish Deere as a substantially more prominent player in global construction equipment markets,” Allen said.