(Rewrites first paragraph, adds analyst comment, stock move)
By Nick Carey
CHICAGO, May 22 (Reuters) - Deere & Co on Friday reported a higher-than-expected quarterly profit and raised its full-year outlook after cost cuts helped compensate for weakening demand for its farm equipment.
The company’s shares rose nearly 4 percent after the earnings announcement.
“We are pleased to see Deere management proactively attacking costs... amid the agriculture downturn,” Edward Jones equity analyst Matt Arnold wrote in a note for clients. “We remain constructive on the long-term outlook for Deere, and we continue to believe the current share price reflects an overly conservative scenario.”
Deere said sales would fall 19 percent in the year ending Oct. 31, compared with its previous forecast of a 17 percent drop. It blamed the decline in part on a stronger U.S. dollar, which reduces the value of goods sold overseas.
Sales for agricultural equipment in the United States and Canada should fall about 25 percent this year, Deere said.
Lower commodity prices and falling farm incomes are putting pressure on demand for agricultural machinery, especially for larger models, the Moline, Illinois-based company said.
Deere, which gets nearly two-thirds of revenue from these products, also forecast a 17 percent profit drop for the current, third quarter.
But the company raised its full-year earnings forecast to $1.9 billion from $1.8 billion in late February.
Earnings fell nearly 30 percent to $690.5 million, or $2.03 per share, in the second quarter ended on April 30 from $980.7 million, or $2.65 per share, a year earlier.
Analysts on average expected $1.55 per share, according to Thomson Reuters I/B/E/S.
Revenue fell almost 18 percent to $8.17 billion from $9.95 billion. Analysts were looking for $7.53 billion.
The company cut costs by 16 percent to $7.15 billion.
Deere’s construction and forestry business was a bright spot in the quarter, with sales rising 2 percent to $1.63 billion. The company said that business should grow by 2 percent in fiscal 2015.
In morning trading, Deere shares were up 3.7 percent at $92.75. (Reporting by Nick Carey; Editing by Jeffrey Benkoe and Lisa Von Ahn)