(Reuters) -Deere & Co on Friday raised its full-year earnings forecast after a 169% surge in quarterly profit, as a recovering global economy boosts demand for farm machine and construction equipment.
The world’s largest farm equipment manufacturer, however, expects supply-chain pressures to intensify in the remainder of the year.
The Illinois-based company is not alone. Rising demand coupled with COVID-19 disruptions has caused capacity constraints all along the supply chain, leaving manufacturers short of the steel, plastics, microchips and tires they need for their products.
Chief Executive Officer John May said Deere (NYSE:DE) is working closely with key suppliers to secure the parts and components.
The company said net income for 2021 would be between $5.3 billion and $5.7 billion, up from a previous forecast of $4.6 billion to $5.0 billion.
Deere’s shares, which have outperformed the S&P 500 with a gain of about 32% this year, were up $1.9% at $362 in pre-market trade.
Farm machinery companies are benefiting from a turnaround in the U.S. farm economy following a run-up in grain prices. A record surge in U.S. corn and soybean prices has boosted farmers’ incomes, lifting demand for tractors and combines.
That is a sharp contrast from previous years when American farmers were grappling with a series of challenges: an oversupply of grain, former President Donald Trump’s trade war with China and then the pandemic.
Deere expects industry sales of large agricultural equipment in the United States and Canada – the company’s biggest combined market – to grow by 25% this year compared with growth of 15% to 20% estimated in February.
Earnings for the second quarter came in at $5.68 per share, higher than $2.11 per share a year ago. Equipment sales rose 34% year-on-year to about $11 billion.