Management maintained its annual profit forecast of $1.1 billion for 2009 due to healthy equipment sales in North America. Samuel R. Allen, CEO, commented in the press release, "We have seen continued benefit from strength in the U.S. market for large farm machinery and from our efforts to keep a tight rein on costs and inventories."

Management did warn though it faced "persistent global economic pressure" as its international sales dropped faster than those in its home market.

Deere expects farm machinery sales in the U.S. and Canada to decline slightly in 2009, although sales of large tractors, combines, sprayers and seeding equipment to be higher. Internationally, the company forecasts agricultural equipment sales in 2009 sliding 10-15% in Western Europe and more sharply in Central and Eastern Europe. Sales in South America are expected to fall 20-30% for the year.

We see this as a very strong quarter for Deere and positions the company well for 2010. We are cautious on the stock though as Deere's stock is up 80% from its March low and could face downward pressure if agriculture prices decline and the housing market recovery is slow.

- Colvin