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Machine makers in building boom
By Padraic Cassidy, CBS
Last Update: 4:28 PM ET Aug. 17, 2004
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NEW YORK (CBS.MW) -- The boom in new housing and a healthy farm harvest are fueling demand for heavy equipment, and machinery maker Deere joined Caterpillar in raising its sales forecast for the rest of the year.

Deere, based in Moline, Ill., reported a 62 percent increase Tuesday in fiscal third-quarter profit from a year earlier, to $401.4 million, or $1.58 a share, from $247.5 million, or $1.02 a share.

Sales increased 40 percent for construction and forestry equipment and 34 percent for agricultural equipment.

For the fourth quarter, Deere (DE: news, chart, profile) said sales would rise 35 percent from last year and that production levels would increase 25 percent.

For the year, Deere said sales of farm machinery would rise 32 percent worldwide, up from a previous prediction of 24 percent to 26 percent; sales of construction and forestry equipment were forecast to rise 50 percent, instead of the previously estimated 35 percent to 37 percent.

Solid farm conditions and increasing farmland values indicate stable agricultural demand, said Greg Derrick, Deere's head of investor relations.

"It appears farmers will have plenty of crop to harvest and to sell this year at prices that remain profitable," Derrick said.

Several weeks ago, Caterpillar (CAT: news, chart, profile) reported earnings that rose $552 million from $399 million, short of analyst forecasts.

But revenue at the Peoria, Ill.-based company rose 28 percent to $7.56 billion, well ahead of analyst predictions for $7.19 billion.

Driving the growth was demand for construction machinery and engines.

Caterpillar raised its 2004 earnings growth outlook to 80 to 85 percent from 65 to 70 percent, and its sales growth projection to 25 percent from 20 percent.

Caterpillar said it would meet those high targets despite paying higher prices for steel and increased freight charges for faster delivery of its finished machines.

Several analysts raised their fourth quarter and yearlong earnings projections Tuesday for Deere, including Morgan Stanley's Stephen Volkmann. "Pent-up demand, low interest rates, and tax incentives have driven strong performance" for Deere and its peers, Volkmann wrote in a research note.

But as he and other analysts noted, the economic recovery might be maturing, and with steel supplies continuing to tighten -- driving up raw material costs for Caterpillar, Deere and others -- shares in equipment manufacturers might be fully valued.

Shares of Caterpillar were down 39 cents to $72.48 Tuesday and shares of Deere fell 87 cents to $60.15.

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Deere I like but Cat I do not like what there up to.The UAW workers are working without a contract since April and Cat just keeps dragging it out.They want to take away there Medical insurance and put a freeze on there raises.They keep hiring casuals they call them workers.So they can avoid offering benifits and now they want to drop the starting pay for new hires to $12.22 and max there pay out to $14.00 and change in two or three years.They hire new guys all the time but they lay off others?Thats just not right they farmed out several of there parts to other Companys like hydraulic cylinders and many parts are now imported.Ask any Cat worker around here and they will tell you.Screw Cat is the words I here.There afraid to strike and walk out because they remember what happened last time.They were out of work for 9 months while Cat brought in scabs.Im not really for unions but I am for treating the employees fair.You can always not give more thats one thing.But to take away is another.Maybe Deere is pulling crap also im not sure.But my opinion Cat might as well go to China and im sure they have something planed.They have a quality product but they have 0 respect from me.
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