Rising costs hit Deere

Deere (DE) shares dropped after the Moline, Ill., tractor maker said rising material costs will weigh on earnings for the second half of its fiscal year.  Deere made $764 million, or $1.74 a share, for the second quarter ended April 30, up from the year-ago $624 million, or $1.36 a share. Sales rose 18% from a year ago to $8.1 billion. Analysts were looking for a $1.75-a-share profit on sales of $7.6 billion.

Deere said the global agriculture boom is helping the company weather the weak economy in the United States. Net equipment sales outside the United States and Canada rose 46% from a year ago, Deere said. But the company added that “escalating raw-material costs and the availability of various parts and components are expected to have an impact on operations for the balance of the year,” and Deere’s guidance appears to be short of the Wall Street consensus estimate.

The company forecast a third-quarter profit of $550 million to $575 million, which works out to around $1.25 to $1.30 a share on a back of the envelope basis. Analysts were looking for $1.49 a share. For the year, Deere said it expects to make $2.2 billion, or about $5 a share - shy of the $5.20-a-share Wall Street target. Shares of Deere, which are up 80% over the past year as farm prices soared,  dropped 7% in early trading Wednesday.