Deere Smashes Expectations

John Deere reported earnings of $2.03 per share, over expectations of $1.56.

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Deere is the world’s leading seller of farming equipment. The company also produces heavy construction equipment like bulldozers and excavators.

In Friday’s earnings statement, the company also had an upbeat outlook for the US housing market:

“The sales improvement reflects economic growth and higher housing starts in the U.S. offset in part by weakening conditions in the energy sector and energy-producing regions as well as lower sales outside the U.S. and Canada.”

Deere forecast that sales of construction and forestry equipment will increase 2% this year, with sales improvements in the US and Europe offsetting declines elsewhere.

Housing starts data has been mixed this year, but in May, we saw starts surge to the highest level since November 2007.

Deere, however, has a bleak outlook for the agricultural sector, saying it sees weak demand for tractors and other heavy machinery.

Great news for Deere, and hopefully for the broader economy. The thing which concerns me however is that nearly all their growth came from housing starts. We’ve seen that bubble before, not coincidentally popping shortly after November 2007.