Don't mention the phrase "global recession" to Deere & Co. (DE): The company said it earned 57 cents per share in the first quarter of fiscal 2010, three times the 19 cent consensus estimate of Thomson/Reuters First Call, on "solid execution" of operating and marketing plans throughout the company.Further, Deere also foresees revenue being up 4% to 6% in the second quarter and up 6% to 8% for the full fiscal year, including a favorable currency-conversion effect of 5% and 3% for the quarter and year, respectively.

Deere earned 48 cents per share a year ago, in Q1 FY2009. Revenue in Q1 FY2010 totaled $4.84 billion, compared to the Thomson/Reuters First Call revenue estimate of $4.19 billion. Revenue totaled $5.15 billion a year ago. Also in Q1, revenue from equipment operations totaled $4.24 billion, compared to $4.56 billion a year ago.

Cost Containment Aids Bottom Line


According to President and CEO Samuel Allen, the company's focus on disciplined cost management continued to produce solid results. The truth of that statement is obvious from the fact that Deere's profits rose substantially despite a 7% decrease in net sales globally for the quarter (including a 5% favorable currency conversion), and an 8% decline in U.S./Canada sales; sales outside the U.S. and Canada fell 6% (plus 12% for currency conversion). Lower raw material costs also aided the bottom line.

"Results for the quarter reflected solid execution of our operating and marketing plans throughout the company and are especially gratifying in light of global economic conditions that remain stubbornly weak," Allen said in a statement. "We are clearly seeing benefit from efforts to win customers with advanced new products while taking cost and asset discipline to an even higher level."

By division, first-quarter agriculture and turf revenue declined 6%, but earnings soared to $353 million from $289 million a year ago, primarily as a result of lower raw-material costs, improved price realization, favorable effects of foreign exchange, and improved product mix.

Construction and forestry sales declined 15%, due to lower shipment volumes, for a loss of $37 million, compared to a profit of $18 million for a year ago.

Concerning its FY2010 revenue outlook by division, Deere expects agriculture and turf revenue to increase 4% to 6%, including a 4% currency conversion effect, and construction and forestry revenue to increase 21%. Deere also forecasts FY2010 credit division revenue of $260 million.

Company Analysis

Without question, it was an outstanding quarter for Deere -- all the more remarkable given the recession that's weighed on sales. As noted, aided by cost containment and lower raw-material costs, Deere, like other U.S. corporations, was able to do more with less in Q1 FY2010. But in Deere's case, the performance was especially impressive.

Hence, look for Deere's stock, which closed Tuesday up 67 cents to $53.78, to rise.

What's more, Deere's strong performance and raised revenue guidance for 2010 serves as another data point for the economic bulls, who argue that both the U.S. and global recoveries are gaining momentum.

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