• Equipment net sales climb 36%, to $9.3 billion, on strength in key markets.
• Earnings per share set third-quarter record.
• Performance benefiting from favorable conditions for agricultural and construction equipment.
• Advanced technology and product features earning strong customer response.

MOLINE, Ill. — Deere & Co. reported net income of $910.3 million for the third quarter ended July 29, 2018 compared with net income of $641.8 million for the quarter ended July 30, 2017. For the first 9 months of the year, net income attributable to Deere & Co. was $1.584 billion compared with $1.649 billion for the same period last year.

The company said agriculture & turf sales rose 18% for the quarter and 19% for the first 9 months due to higher shipment volumes as well as lower warranty expenses and price realization.

Worldwide net sales and revenues increased 32%, to $10.308 billion, for the third quarter and rose 29%, to $27.942 billion, for nine months. Net sales of the equipment operations were $9.286 billion for the third quarter and $25.007 billion for the first 9 months, compared with $6.833 billion and $18.791 billion for the same periods last year.

“Deere’s third-quarter performance benefited from favorable market conditions and positive response to our advanced product lineup,” said Samuel R. Allen, chairman and chief executive officer. “Farm machinery sales in North America and Europe made solid gains, while construction equipment sales moved sharply higher and received significant support from our Wirtgen road building unit. At the same time, we have continued to face cost pressures for raw materials and freight, which are being addressed through a combination of cost management and pricing actions.”

Summary of Operations

Net sales of the worldwide equipment operations increased 36% for the quarter and 33% for the first 9 months compared with the same periods a year ago. Deere’s acquisition of the Wirtgen Group (Wirtgen) in December 2017 added 17% to net sales for the quarter and 12% year to date.

Equipment net sales in the U.S. and Canada increased by 29% for the quarter and 27% year-to-date, with Wirtgen adding 6% and 4% for the respective periods. Outside of the U.S. and Canada, net sales rose 45% for the quarter and 42% for the first nine months, with Wirtgen adding 31% and 23% for the periods.

Deere’s equipment operations reported operating profit of $1.087 billion for the quarter and $2.822 billion for the first 9 months, compared with $804 million and $2.179 billion, respectively, last year. Net income of the company’s equipment operations was $751 million for the third quarter and $889 million for the first 9 months, compared with net income of $506 million and $1.291 billion for the same periods of 2017.

Financial services reported net income attributable to Deere & Co. of $151.2 million for the quarter and $680.6 million for the first 9 months compared with $131.2 million and $349.1 million last year. Results for both periods benefited from a higher average portfolio and a lower provision for credit losses, partially offset by less-favorable financing spreads. Nine month results also were helped by lower losses on lease residual values.

Company Outlook & Summary

Company equipment sales are projected to increase by about 30% for fiscal 2018 and by about 21% for the fourth quarter compared with the same periods of 2017. Of these amounts, Wirtgen is expected to add about 12% to Deere sales for both the full year and fourth quarter. Net sales and revenues are expected to increase by about 26% for fiscal 2018 with net income attributable to Deere & Co. forecast to be about $2.360 billion.

“We continue to believe Deere is well positioned to capitalize on growth in the world’s agricultural and construction equipment markets,” Allen said. “Replacement demand for large agricultural equipment is driving sales even in the face of tensions over global trade and other geopolitical issues.

“At the same time, we are heartened by our customers’ enthusiastic response to the advanced features and technology found on our new products. What’s more, the powerful global trends of population growth and increased urbanization remain quite vibrant and are putting a positive light on the company’s prospects for the future. As a result, we’re confident Deere is on track to continue its strong performance and deliver significant value to customers and investors in the years ahead.”

Equipment Division Performance

Agriculture & turf sales rose 18% for the quarter and 19% for the first 9 months due to higher shipment volumes as well as lower warranty expenses and price realization. Operating profit was $806 million for the quarter and $2.249 billion year to date, compared with respective totals of $693 million and $1.920 billion last year. The improvement was driven by higher shipment volumes, lower warranty-related expenses and price realization, partially offset by higher production costs and research and development expenses. Last year, both periods benefited from gains on the SiteOne sale.

Market Conditions & Outlook

Deere’s worldwide sales of agriculture and turf equipment are forecast to increase by about 15% for fiscal-year 2018, with foreign currency rates not expected to have a material translation effect.

Industry sales of agricultural equipment in the U.S. and Canada are forecast to be up about 10% for 2018, led by higher demand for large equipment. Despite drought concerns in some areas, full year industry sales in the EU28 member nations are forecast to be up 5-10% as a result of favorable conditions in the dairy and livestock sectors and positive arable farming conditions in certain key markets. South American industry sales of tractors and combines are projected to be flat to up 5% benefiting from strength in Brazil. Asian sales are forecast to be in line with last year.

Industry sales of turf and utility equipment in the U.S. and Canada are expected to be flat to up 5% for 2018.