CHICAGO (Reuters) - Deere & Co (N:DE) on Friday reported an unexpected increase in first-quarter profit and retained its full-year earnings forecast as signs of stabilization in the U.S. farm sector offset weak demand for construction machines, sending its shares soaring.
The farm equipment manufacturer reported net income of $517 million, or $1.63 per share, for the quarter ended Feb. 2, up from $498 million, or $1.54 per share, in the same period last year.
That compares with the average analyst estimate of $1.26 per share, according to Refinitiv Eikon data.
The Moline, Illinois-based company said it still expects net income in 2020 to be in the range of $2.7 billion to $3.1 billion.
The world's largest farm equipment maker's shares were last up 9% at $180.75 in pre-market trade.
Deere's earnings in the past quarters were buffeted by a nearly two-year-long U.S.-China trade war that hit U.S. agricultural exports, leaving farmers struggling to turn a profit.
But President Donald Trump's interim trade deal with China has raised hopes of a recovery in farm machinery demand.
"Farmer confidence, though still subdued, has improved due in part to hopes for a relaxation of trade tensions and higher agricultural exports," Chief Executive John May said in a statement.
Improved pricing power along with lower production costs and warranty expenses in the latest quarter drove up operating profits at its farm and turf business, which accounts for nearly 60% of Deere's revenue.