Agricultural machinery giant Deer Corporation (DE.US) reported higher-than-expected Q2 profits: demand for construction machinery surging by 29%, while weak demand for agricultural machinery dragged down the full-year forecast.

Agribusiness machinery giant Deere & Co (DE.US) announced that its second-quarter profits exceeded market expectations, thanks to improved demand for its small agriculture and construction machinery. The company, however, maintained its full-year profit outlook unchanged. According to the financial report, Deere's second-quarter revenue reached $13.37 billion, a 4.8% year-over-year increase, surpassing expectations by $1.87 billion; earnings per share were $6.55, exceeding expectations by $0.81. Due to years of soft crop prices and rising costs causing farmers to postpone purchasing new farm machinery, Deere's construction business segment became a highlight. Last month, competitors in the construction equipment sector, Caterpillar Inc., Pella, and Case New Holland Technology, told investors that they saw improvements in product demand, with dealers opting to increase inventory. In the three months ending May 3, Deere's small agriculture segment revenue increased by 16%, while the construction segment revenue surged by 29%. These two segments contributed 62% to the company's net sales, driving a 5.4% increase in net sales to $11.78 billion, surpassing analysts' expectations of $11.54 billion. Deere also mentioned a $272 million tariff refund that helped improve the company's performance. However, the world's largest agricultural machinery manufacturer noted challenges facing the agricultural market, while keeping its full-year net profit target range of $4.5 billion to $5 billion unchanged. Obermeyer analyst Kristen Owen stated, "Despite the encouraging growth in the construction segment, investors are still looking for signs of recovery in the agricultural segment, which currently shows mixed performance globally." With weak demand for heavy equipment such as combines, the company's largest segment - production and precision agriculture - revenue declined by 14%. Against the backdrop of an expected decrease in US farm net income this year, the company is facing pressure to reduce costs in this segment.