By Rajesh Kumar Singh
CHICAGO, May 18 (Reuters) - U.S. tractor maker Deere & Co on Friday revised up its full-year earnings estimate on stronger demand for its construction equipment, sending shares were up more than 3 percent in early trading.
Still, the company missed second-quarter profit estimates amid higher freight and raw-material costs.
The Moline, Illinois-based company now expects full-year adjusted earnings to be $3.1 billion, higher than $2.85 billion forecast earlier. Net sales and revenues for fiscal 2018 are expected to jump about 26 percent from the previous year.
Adjusted profit in the quarter ended April 29 was $3.14 per share, lower than $3.31 per share mean analyst estimates. Equipment sales rose 34 percent year-on-year to $9.7 billion.
Deere said it was facing higher raw-material and freight costs. Its cost of sales shot up by 35 percent in the quarter from a year ago.
The company said it was trying to offset the increased costs through structural cost reduction and pricing actions. Still, it expects input costs during the year to be higher than its previous estimate.
Deere's shares were up 3.2 percent in early trading on Friday.
U.S. President Donald Trump's tariffs on steel and aluminium imports have inflated raw material costs for U.S. manufacturers. Caterpillar last month warned that rising materials costs could squeeze profit margins in the coming quarter.
Deere has been battling tepid demand in North America, its biggest market, for the past four years as U.S. farm income has more than halved since 2013.
It expects U.S. net farm cash income to dip further this year and has trimmed its farm equipment sales growth forecast for 2018 to 14 percent from 15 percent estimated in February.
But sales at its construction & forestry division are projected to be higher than previously anticipated.
Overall, the company sees a 30 percent annual increase in full-year equipment sales and a 35 percent year-on-year jump in the third quarter.
Those estimates could come under threat if a U.S. trade spat with China escalates.
In retaliation for U.S. President Donald Trump's proposed crackdown on Chinese imports, Beijing has proposed duties on U.S. farm imports such as soybeans, wheat and corn.
Higher trading costs would add to the challenges facing farmers, who are already feeling squeezed by rising interest rates and high land prices.
Underscoring those concerns, the company's shares have fallen more than 6 percent this year after gaining about 52 percent in 2017. (Reporting by Rajesh Kumar Singh; Editing by Bernadette Baum and Bill Trott)