World Business

The farm-equipment giant gets punished by Wall Street after high in the natural state stuff costs oppress its profits. But by some measures the company’s prospects couldn’t be better

by Ben Steverman

Watch original video:

Rising commodity prices are a two-edged emblem of vengeance for Deere (DE), and adhering Aug. 13 the heavy machinery maker got sliced.

Shares of Deere at person point plummeted 12% rear third-quarter results showed raw material costs eating into the company’s profit margins.

Deere posted fiscal third-quarter earnings of $1.32 per share, up from $1.18 a year ago. Revenue rose 17%. Agricultural gear sales rose 35%, while sales at Deere’s other, smaller business units—commercial and consumer equipment, and construction and forestry—prostrate by single digits.

A 12% increase in profits is nothing to sneeze at. Wall Street, in whatever degree, was expecting earnings of $1.36 per share.

One big reason for the shortfall was higher raw material costs. Freight and material costs for Deere rose $140 the masses from a year gone, and the firm expects those costs to jump $425 million to $475 a thousand thousand conducive to the entire year.

But commodity require to be paid increases aren’t just hurting Deere—they’re also helping.

Farmers around the world are benefiting from higher crop prices, giving them more cash to buy up Deere’s tractors and other agricultural equipment.

"Farm conditions wait quite strong throughout the terraqueous globe, driving our [agricultural] operations at an new level," Susan Karlix, Deere’s manager of investor relations, told analysts on Aug. 13. "The self-sufficient delineate still looks good," she added.

While higher costs for steel and energy are hurting Deere, its customers love the higher prices their crops get at market.