Deere & Co. reported Wednesday that its first quarter net income increased about 5 percent, a record for a first quarter and the 15th consecutive record year-over-year quarterly earnings.
Net income for the Moline-based equipment manufacturer was $681.1 million, or $1.81 per share, for the first quarter, compared with $649.7 million, or $1.65 per share, for the same period last year.
Worldwide net sales and revenues for the first quarter increased 3 percent, to $7.654 billion, compared with $7.421 billion last year. Net sales of the equipment operations were $6.949 billion compared with $6.793 billion a year ago.
Deere spokesman Ken Golden said the 15 straight record quarters is unlike anything experienced before by the company.
"I don't think we ever had a stretch of that performance," he said. "In my review of that record, we never had that many in a row. It is really broad-based in all three divisions. All had a higher income. It really represents Deere and its employees. We are executing our business plans in a very disciplined way. We set this record in a time when, going into this quarter, we expected those sales and income would decrease, and it did not."
Deere's top leader also reacted positively to the results.
"With another record quarter, John Deere has started 2014 on a strong note,” Samuel R. Allen, chairman and CEO, said in a news release. “Our results demonstrate the adept execution of our operating and marketing plans, which are aimed at expanding our global market position and helping our customers throughout the world be more profitable and productive. In addition, we are seeing further benefit from efforts to hold the line on costs."
Net sales of the worldwide equipment operations increased 2 percent for the quarter. Sales included price increases of 2 percent and an unfavorable currency-translation effect of 2 percent. Equipment net sales in the United States and Canada rose 3 percent for the quarter. Outside the U.S. and Canada, net sales increased 2 percent, including an unfavorable currency-translation effect of 3 percent.
Deere’s equipment operations reported operating profit of $891 million for the quarter, compared with $837 million last year. Financial services reported net income attributable to Deere of $142.2 million for the quarter compared with $132.9 million last year. Company equipment sales are projected to decrease about 3 percent for fiscal 2014 and be down about 6 percent for the second quarter compared with the same periods of 2013. For the full year, net income is anticipated to be about $3.3 billion.
Construction and forestry sales rose 4 percent for the quarter, with operating profit of $94 million compared with $71 million a year ago. The improvement in operating profit was due primarily to lower production costs, decreased research and development expenses, and price realization. These factors were partially offset by the impact of lower production volumes.
Deere stock closed at $86.90 Wednesday on the New York Stock Exchange.
The company expects sales of agriculture and turf equipment to decrease by about 6 percent for fiscal 2014. Although farm incomes are expected to remain at healthy levels in 2014, they are forecast to be lower than in the previous year, the company said.
Deere believes the decline will have a "dampening effect on demand, especially for larger models of equipment. Partly as a result of these factors, industry sales for agricultural machinery in the U.S. and Canada are forecast to be down 5 to 10 percent for the year, with the decline mainly reflecting lower sales of high-horsepower tractors and combines."
“Even in the face of moderating demand for agricultural equipment, Deere is well positioned to deliver solid performance,” Allen said. “We believe that our extensive investments in new products and new markets will provide strong support to our results and keep our strategic plans moving ahead."
Those plans are essential to helping to meet the world’s growing need for food, shelter and infrastructure, Allen said. He also expressed confidence they would produce significant benefits for the company’s investors and customers over the long term.
In the U.S. and Canada, industry sales of turf and utility equipment are expected to be up about 5 percent for 2014 as a result of improved market conditions. Deere’s worldwide sales of construction and forestry equipment are forecast to increase by about 10 percent for 2014. The gain reflects further economic recovery and higher housing starts in the U.S. as well as sales increases outside
Net income attributable to John Deere Capital Corp. was $136.5 million for the first quarter, compared with $105 million last year. Results improved for the quarter primarily due to growth in the credit portfolio and a more favorable effective tax rate, partially offset by less favorable financing spreads.
"We continue to position things this year," Golden said. "Overall, it is expected to be lower than a year ago. But last year was a record. ... So, these are very high levels compared to the past. We believe we started with a good, solid quarter and a good, solid year."