* Fiscal Q3 better than expected
* Full-year forecast implies disappointing Q4
* Shares slip in early trading (Recasts, adds details on outlook, analyst comment and byline, updates shares)
By James B. Kelleher
CHICAGO, Aug 19 (Reuters) - Deere & Co reported a higher-than-expected third-quarter profit as improved profitability in its core agriculture machinery business helped to offset weakness in construction and forestry equipment.
But the company said it expected to barely break even in current quarter, sending its shares lower in premarket trade.
The world's largest maker of tractors and harvesters, which is cutting production in anticipation of lower demand next year, reported a third-quarter profit of $420 million, or 99 cents a share, down from $575.2 million, or $1.32 a share, last year. Sales fell 24 percent to $5.89 billion.
Analysts, on average, had expected the company to report a profit of 56 cents per share on sales of $5.27 billion.
Analyst Eli Lustgarten of Longbow Research called the results "a clean beat," although 20 cents of the earnings came from non-operating items, including a lower tax rate.
The Moline, Illinois-based company reiterated its forecast for a full-year net profit of "approximately $1.1 billion."
Since Deere has already reported earnings of $1.1 billion for the first nine months of the year, the guidance implied a break even or possibly even a marginally unprofitable fiscal fourth quarter.
"They're burying the fourth quarter with these production cuts," Lustgarten said. "And so their guidance is for a marginally break-even quarter."
Analysts had expected Deere to report a fourth-quarter profit of 33 cents a share, according to Reuters Estimates.
Deere shares were trading t $44.60 in premarket trading, down from Tuesday's close of $45.09. (Reporting by James B. Kelleher, editing by Maureen Bavdek and Ted Kerr)