Agriculture and construction equipment maker Deere & Co.'s net income rose about 50% in the fiscal second quarter from a year earlier as higher shipment volumes and lower warranty costs boosted the operating profit of the company's equipment operations.
Net income attributable to the company was $1.21 billion, or $3.67 per share, for the fiscal second quarter ended April 29, up from $808.5 million, or $2.50 per share, in the same quarter of last year. Deere said its results for the second quarter include a favorable net adjustment to provisional income taxes of $174 million.
Non-GAAP EPS for the quarter was $3.14, falling short of the S&P Capital IQ consensus normalized EPS estimate of $3.33.
Net sales and revenues increased 29% year over year to $10.72 billion from $8.29 billion. Deere's operating profit for the quarter increased to $1.49 billion from $1.28 billion in the year-ago quarter.
Deere's equipment operations, which includes agriculture and turf and construction and forestry businesses, reported an operating profit of $1.32 billion for the quarter, up from $1.12 billion in the prior-year quarter. The increase was primarily due to higher shipment volumes and lower warranty costs that were partially offset by increased research and development expenses and higher production costs.
Operating profit of the company's agriculture and turf business increased to $1.06 billion and construction and forestry's operating profit surged 133% year over year to $259 million. The company's financial services business reported an operating profit of $179 million, up 13% from $158 million in the prior-year quarter.
"Farm machinery sales in both North and South America are making solid gains and construction equipment sales are continuing to move sharply higher," said Chairman and CEO Samuel Allen. "At the same time, we are experiencing higher raw-material and freight costs, which are being addressed through a continued focus on structural cost reduction and future pricing actions."
For the six months ended April 29, net income attributable to Deere was $673.2 million, or $2.05 per share, down from $1.01 billion, or $3.14 per share, in the year-ago period.
Deere expects net income attributable to it of about $2.30 billion and adjusted net income of roughly $3.10 billion for fiscal year 2018. The company projects its equipment sales to rise 30% in fiscal 2018 and by about 35% in the third quarter year over year.
"We are encouraged by strengthening demand for our products and believe Deere is well-positioned to capitalize on further growth in the world's agricultural and construction equipment markets," Allen said.
The company's share price was up 2.85% at 9:47 a.m. ET.