Deere Post Better Than Expected Profit

The current economic back drop has meant that many heavy equipment makers have been facing a number of different challenges. In the case of Deere, they were hit by sharp declines in spending for heavy equipment and a lack of credit to businesses. Together, these two elements caused their overall level of earnings to plummet. However, despite the company calling the economy "stubbornly weak," they did manage to post a better than expected earnings, with them reporting earnings per share of $.57 cents. This is better than the $.48 cent per share that was reported at this time last year. The biggest reason for the increase was the massive cost cutting program that the company has been involved in; with costs declining by 8% in 2009. This helps to offset the 6% decline in sales that were seen, during the same time frame. However, the company said that despite the severe economic challenges; they expect that the overall amount of earnings will increase in 2010. As they raised, guidance for profits to: $1.3 billion; this above the previous guidance of $900 million, given last November.

What this shows; is that some sort of bottom has taken place in the economy. However, the recovery could be slow, as businesses wait before making any big equipment purchases. The ability of Deere to reduce cost and increase profits, during times of economic challenges; shows that when the recovery comes, they could see a sharp rise in earnings. This because they managed how to increase their overall bottom line, during some of the worst economic conditions, since arguably the Great Depression.