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Deere & Co., the world's largest of maker of farm machinery, said Wednesday third-quarter profit rose 7 percent as high crop prices spurred stronger sales of tractors and harvesting equipment, reports AP. But lower sales of its consumer, construction and forestry equipment, coupled with higher costs of raw materials such as steel and rubber, hurt the company, which missed Wall Street earnings estimates for the second straight quarter.
Shares of the Moline, Ill.-based company fell $4.80, or nearly 7 percent, to $64.55 in morning trading.
Deere has benefited from soaring crop prices, driven by increased wealth and food demand from nations like China and India, along with higher consumption of corn-based ethanol for bio fuels. Farmers reaping rewards from higher food prices have been buying new equipment. Deere also has enjoyed an export boom as the dollar's decline overseas makes its machinery cheaper in most markets beyond North America.
As of mid-August, corn futures are up 55 percent from last year, although they've fallen 25 percent in the last month. Soybean futures, meanwhile have lost 26 percent over the past month but are up 40 percent since last year, Baird analyst Robert McCarthy said. Wheat futures have climbed 26 percent in the past year.
''Though agricultural commodity prices have moderated, they remain quite favorable by historical standards and are continuing to provide strong support to farm incomes and to the sale of productive farm machinery worldwide,'' Robert Lane, Deere's chairman and chief executive, said in a statement.
Deere earned $575.2 million, or $1.32 per share, for the three months ended July 31, compared with $537.2 million, or $1.18 per share, during the same period last year.
Quarterly revenue rose 17 percent to $7.74 billion.
Analysts surveyed by Thomson Reuters, on average, forecast profit of $1.36 per share on revenue of $7.23 billion. Those estimates often exclude one-time items.
Deere said equipment sales in the United States and Canada rose 6 percent during the quarter, while they gained 38 percent outside North America.
The company said its agricultural equipment sales skyrocketed 35 percent during the quarter, bringing operating profit for that segment to $634 million.
Besides its green and yellow tractors and harvesting machines, the company makes construction and forestry equipment such as backhoes and excavators. It also manufactures consumer equipment including riding mowers, chain saws and snow blowers.
But sales of its construction and forestry equipment fell 7 percent under pressure from a weak U.S. economy, with operating profit of $93 million. Sales of commercial and consumer equipment dropped 1 percent, with operating profit of $91 million.
Deere said it expects equipment sales to jump by 21 percent for the full year and 29 percent for the fourth quarter of 2008. That would bring earnings to roughly $425 million, up from $422.1 million in the same period last year.
For the first nine months of the fiscal year, Deere said it earned $1.71 billion, or $3.89 per share, on $21 billion in sales. That compared with $1.4 billion, or $3.06 per share, on $17.9 billion in sales a year earlier.
The company's stock has plummeted about 23 percent since its last quarterly earnings announcement in May.
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