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May 21 (Reuters) - Deere & Co on Friday raised its full-year earnings forecast after a 169% surge in quarterly profit, as a recovering global economy boosts demand for farm machine and construction equipment.
The world’s largest farm equipment manufacturer, however, expects supply-chain pressures to intensify in the remainder of the year.
The Illinois-based company is not alone. Rising demand coupled with COVID-19 disruptions has caused capacity constraints all along the supply chain, leaving manufacturers short of the steel, plastics, microchips and tires they need for their products.
Chief Executive Officer John May said Deere is working closely with key suppliers to secure the parts and components.
The company said net income in fiscal 2021 would be between $5.3 billion and $5.7 billion, up from $4.6 billion to $5.0 billion estimated in February. It is the second time in four months it has upgraded the outlook.
Deere’s shares, which have outperformed the S&P 500 with a gain of about 32% this year, were up 1.7% at $361.3 in pre-market trade.
Agricultural equipment makers are benefiting from a turnaround in the farm economy. Farmers flush with cash after a jump in U.S. grain prices are finally investing in new tractors and combines to replace their aging fleets.
Deere expects industry sales of large agricultural equipment in the United States and Canada - the company’s biggest combined market - to grow by 25% this year compared with growth of 15% to 20% estimated in February.
The roaring demand coincides with record low inventories, allowing farm machinery companies to charge higher prices for their equipment.
Deere’s revised full-year outlook assumes a 7% increase in prices for technology solutions and products such as large tractors, combines and harvesters.
Earnings for the second quarter came in at $5.68 per share, higher than $2.11 per share a year ago. Equipment sales rose 34% year-on-year to about $11 billion. (Reporting by Rajesh Kumar Singh in Chicago and Shreyasee Raj in Bengaluru; Editing by Vinay Dwivedi, Chizu Nomiyama and Emelia Sithole-Matarise)