Deere & Co. (DE) shares rose nearly 6 percent on Friday after the company lifted its earnings outlook for the full year amid strong equipment demand. It also revealed its plans of increasing prices to balance rising costs.
Looking forward, the company now expects to report adjusted profit of about $3.1 billion for the full-year, above its previous projection of around $2.85 billion.
Revenues are expected to increase nearly 26 percent versus last year, while equipment sales are expected to jump 30 percent.
U.S. President Donald Trump recently imposed duties on steel and aluminum imports that have raised material costs for U.S. manufacturers.
Higher freight and raw-material expenses weighed on its second-quarter earnings. It sales costs soared by 35 percent in the quarter, as compared to last year. It also expects input costs to remain higher this year.
Chief Financial Officer Raj Kalathur said that material and freight costs have surpassed Deere’s outlook for the year, mainly due to inflation in the steel prices and a rigid market for logistics.
To offset these costs, the maker of agricultural and construction equipment is planning structural cost savings and price hikes.
The company reported net income of $1.208 billion, or $3.67 per share for the quarter ended April 29, up from $808.5 million, or $2.50 per share in the same period last year. On an adjusted basis, the company posted a profit of $3.14 per share that fell short of $3.30 per share estimated by analysts.
Deere’s equipment sales jumped to $9.747 billion in the quarter, versus $7.260 billion last year, but below consensus forecast of $9.822 billion.
The company slashed its farm equipment sales growth outlook to 14 percent for the current fiscal year, as it is seeing U.S. net farm cash income to drop further in 2018.