Deere & Co. last week announced worldwide net income of $537.2 million, or $2.37 per share, for the third quarter ended July 31, compared with $436.0 million, or $1.85 per share, for the same period last year. Net income was the highest for any third quarter in the company's history.

For the first nine months, net income was $1.40 billion, or $6.12 per share, compared with $1.42 billion, or $5.96 per share, last year.

“Deere’s efforts to grow a great business, particularly with the support of improving conditions across the global farm sector, are gaining strong momentum and producing powerful results,” said Robert Lane, chairman and CEO. “Advanced new products and services are helping expand the company’s market presence throughout the world. At the same time, our focus on rigorous asset management allows us to serve this growing customer base at the highest level while maintaining lean, efficient inventory levels.”

With Deere's third-quarter results, trade receivables and inventories in relation to sales have declined for each of the last 29 quarters, compared with the same period of the prior year.

Worldwide net sales and revenues increased 6 percent to $6.63 billion for the third quarter and were up 5 percent to $17.94 billion for the first nine months. Net sales of the equipment operations were $5.99 billion for the quarter and $16.07 billion for nine months, versus $5.68 billion and $15.40 billion for the respective periods last year.

Net sales of the worldwide equipment operations increased 5 percent for the quarter and rose 4 percent for nine months. This included positive effects for currency translation and price changes of 5 percent for the quarter and 4 percent for nine months. Equipment sales in the U.S. and Canada were down 5 percent for the quarter and down 4 percent for the year to date, while net sales outside the U.S. and Canada increased by 30 percent for the quarter and 25 percent for nine months.

Deere's equipment divisions reported operating profit of $708 million for the quarter and $1.81 billion for nine months, compared with $583 million and $1.63 billion for the same periods last year.

Company equipment sales are projected to increase by about 16 percent for the fourth quarter and 7 percent for the full year. Included in the fourth-quarter forecast is about 5 percentage points due to sales made by Lesco Inc., and 3 points of positive currency translation. Lesco is a supplier of consumable lawn care, landscape, golf course and pest control products that was acquired in the third quarter. For the full year, Deere's net income is forecast to be about $1.70 billion.

Commercial & Consumer division sales rose 15 percent for the quarter and 6 percent for nine months compared with the prior year. Operating profit was $127 million for the quarter and $315 million for nine months, compared with $78 million and $225 million last year.

Construction & Forestry sales declined 20 percent for the third quarter and were down 13 percent for nine months. Operating profit was $150 million for the quarter and $437 million year to date, compared with $256 million and $666 million a year ago. Lower operating profit for both periods was primarily due to lower sales and production volumes and higher raw-material costs, partially offset by positive price realization.

John Deere commercial and consumer equipment sales are projected to be up about 11 percent for the year, including about $350 million of sales from Lesco. Division sales are continuing to benefit from new lines of residential zero-turn radius mowers, utility vehicles, and compact tractors, among other products.

According to the company, U.S. markets for construction and forestry equipment are remaining under pressure. Although nonresidential spending is growing, housing construction has experienced a significant downturn. Further, sales to the independent rental channel are expected to be well below last year's levels. In forestry equipment, sales have declined substantially in the U.S. but moved higher in Europe and other areas. In this environment, Deere's worldwide sales of construction and forestry equipment are forecast to decrease by about 12 percent for the year.

According to David Bleustein, machinery/diversified industrials analyst for UBS Investment Research, the firm calculates that Deere's revised guidance of $1.70 billion translates to roughly $7.45-$7.50 per share (vs. consensus $6.98), using a share count of roughly 227 to 228 million. This revised fiscal year forecast implies fiscal Q4 forecast net income of roughly $300 million, equivalent to earnings per share of roughly $1.33 (the consensus is $1.23).

In addition, UBS’ price target is $127 per share, a 5 to 10-percent discount to the market on its full-year 2008 EPS estimate, plus roughly $10 of excess cash on the balance sheet. UBS maintains its neutral rating on Deere & Co.

Deere & Co. is headquartered in Moline, Ill.